Apartment Living Gets More Costly

Apartment dwellers across Southern California should skip that extra cosmopolitan: Rents rose again in the second quarter.

At the same time, some occupancy rates dipped slightly.

The average monthly rent in Los Angeles County was $1,376, compared with $1,355 in the first quarter and $1,325 in the second quarter of 2003, RealFacts, a Novato, Calif., research firm, said in a recent survey of apartment complexes with 100 or more units.

In Orange County, the average was $1,297, up from $1,283 in the first quarter and $1,253 in the year-ago period.

Apartment rents also continued to march upward in the booming Inland Empire -- a region long equated with affordability. The average there was $978, 2% higher than in the first quarter and 6% higher than in the second quarter of 2003.

That 6% year-over-year increase was the largest in the 25 Western markets from Dallas to Seattle surveyed by RealFacts.

In the last year, Los Angeles County rents have risen 3.9%; in four years they’ve soared 23%. Orange County renters, meanwhile, are ponying up 3.5% more this year and 15.7% more than in 2000, according to RealFacts.

Some occupancy rates are headed in a different direction.

In L.A. County, an average of 94.7% of apartments were occupied in the second quarter, compared with 95.3% in all of 2003. Orange County’s 95% occupancy rate was just below last year’s 95.4%. In the Inland Empire, 95% of apartments were filled, down slightly from 95.3% in the first quarter.

Additional rent hikes could be accompanied with more empty apartments, said William Ktsanes, RealFacts’ director of research and analysis.

“They’re kind of at the edge,” he said. “Even though the markets are very healthy, there’s not a whole lot of room to push rents further.”

It’s not just large complexes demanding more cash. Some “mom and pop” owners are as well, said Mark Verge, owner of WestsideRentals.com, which lists more than 14,000 units.

“They just think they can get so much money and they can’t,” he said.

Verge recently persuaded a landlord to reduce the price of a one-bedroom, one-bath apartment in Santa Monica from $1,350 to $1,200. It “wasn’t moving at 13,” he said.

But even that isn’t affordable to some people, meaning that smaller efficiencies -- tiny apartments that typically rent for under $1,000 -- are sizzling.

“They’re just getting grabbed,” said Steve Fleischmann, vice president of sales for R&E; Investments, which manages more than 100 area properties.

Although it’s more expensive to rent in Southern California, Silicon Valley -- which bore the brunt of the dot-com bust -- is getting cheaper. In the second quarter, rents dropped 0.5% to $1,271. They’ve fallen 2.8% in the last year.

Meanwhile, for the first time in about four years, rents increased in the Bay Area, which includes Oakland and Fremont. Average prices nudged upward 0.2% to $1,310. But average rents remain down 1% from 2003’s second quarter.

“Recovery is starting to take hold,” Ktsanes said. “It’s clearly bottomed out.”

Looking ahead, several factors could yield better occupancy rates for landlords, Ktsanes said. An increase in mortgage rates could “slow the stampede toward homeownership,” and some homeowners’ might be unable to afford their adjustable-rate mortgage if that happens, he said.

Home prices across Southern California continue to soar -- Los Angeles County’s median price recently hit $414,000 -- making renting more economical for some people than taking on a hefty mortgage.

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Rental prices

Average monthly apartment rent in the second quarter (percentage change from a year earlier)

Los Angeles County: $1,376 (+3.9%)

Orange County: 1,297 (+3.5%)

Ventura County: 1,295 (+5.1%)

San Diego County: 1,197 (+3.3%)

Northern California: 1,139 (-0.8%)

Inland Empire: 978 (+6.0%)

Based on a survey of complexes with 100 or more units.

Source: RealFacts