Demand for Home Rentals Pushing Up Rates
The cost of renting a home in Los Angeles and elsewhere in Southern California is rising because of growing demand from people unable to buy.
Rental prices in Los Angeles rose 4.6% in the fourth quarter to an average of $1,408 a month, spurred by a 20% increase in the price of previously owned homes, according to a report issued Saturday by the Los Angeles County Economic Development Corp.
The population of Southern California, home to 20.7 million people, may grow 7.1% by the end of the decade, according to the report. The median price of a previously owned home in Los Angeles County rose to $451,333 last year, according to the report.
“People don’t have enough money for the down payment or aren’t willing to take the risk, so they are staying in rentals,” said Jack Kyser, chief economist with the Economic Development Corp.
The inability of a growing number of people to purchase homes at today’s record prices is reflected in the length of time homes stay on the market. By April, the latest month for which data are available, it took 28 days to sell a single-family home, up from 23 days a year earlier, the California Assn. of Realtors said in a report.
The rise in home prices in California and nationwide has been fueled by mortgage rates near historical lows. The interest rate on a 30-year fixed-rate mortgage averaged 5.84% last year, according to mortgage buyer Freddie Mac. That compares with an average rate of 6.96% over the previous five years.
Southland home prices are more than twice as high as those across the U.S., where the median price topped $200,000 for the first time in April.
“Some buyers are a little bit hesitant because prices are a little high,” said Patrick McDonald, a ZipRealty Inc. district director for an area that includes the San Fernando Valley. “I would actually prefer the market to cool off a bit because we can’t take care of our buying customers.”
The Southern California sales data compiled for the economic development organization by Anaheim-based First American Real Estate Solutions covers the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego.
