Rents rise but growth stays slow
The high cost of renting in Southern California keeps getting higher, but prices have lately been rising at a slightly more leisurely pace.
The average monthly rent in the Los Angeles metropolitan area grew 1.5% in the first quarter -- to $1,588 -- from the fourth quarter. That marked the second quarter in a row that growth was under 2%, according to data to be released today by RealFacts, a Novato, Calif., firm that tracks rents in 15 Western states. RealFacts tracks only investment grade communities with 100 or more units, excluding smaller rental properties run by individuals whose rents may deviate from these numbers.
“People will pay ridiculous amounts of money to live in L.A.,” said Chris Bates, a RealFacts analyst. But now “some people are saying ‘enough’ and moving out.”
That might be one reason behind the slowing increase. Another is supply: People who bought condos and can’t unload them are leasing them out instead.
“Right now, it’s not a good time to sell,” said Christiano Sampaio, a Realtor who concentrates on downtown L.A. New condo owners are often flexible about rental rates, he added, because they need to pay their mortgages and don’t want to leave their properties empty.
Landlords of all stripes are hesitant to raise rents because rates are already so steep.
“I don’t think the market can take huge increases,” said Nancy Ahlswede, chief executive of the Apartment Assn., California Southern Cities.
Rents have soared in the region in the last four years, by about 20% in Southern California’s six counties, 23% in the Inland Empire and nearly 24% in Los Angeles County.
That dwarfs the increases in other metro areas. In San Francisco since 2003, the rise has been 10%, and in Dallas it has been 1.8%.
Year over year, the first-quarter 2007 increase in the average rent in the L.A. metro area was 6.9%. The year-over-year rise from the first quarter 2005 to the first quarter 2006 was 6.7%.
The last time the quarter-to-quarter growth rate exceeded 2% was in the third quarter of 2006, when it was 2.5%.
Metro L.A. -- which includes Los Angeles and Orange counties -- was the most expensive place in the West to rent a house or apartment in the first quarter of this year.
The $1,588 L.A. average compared with $538 in Tulsa, $655 in Tucson and $1,459 in the San Francisco metro area.
Renters had a lot of options, as a number of newly built condos and apartments came on the market in Hollywood, the San Fernando Valley and elsewhere, said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate.
The construction boom, she said, is providing relief to renters.
At the same time, people squeezed out of apartments in the most expensive areas are doubling up and sharing, said Anthony Yannatta, chief executive of Santa Monica-based listings service Westside Rentals. Last month, Westside Rentals posted a new roommate networking tool on its website to help potential renters find roommates.
As rents continue to rise, people are wondering whether they should buy. But mortgage payments are still, on the whole, higher than rental payments, Conway said. And many renters can’t come up with the down payment necessary for a purchase.
It was a decision Alison Rivers, 36, and her family faced when they moved out of a rental in Santa Monica a little over a year ago. She and her husband decided to rent a five-bedroom house in the Sunset Park area for their family, which includes three children under 5.
Since then, their rent has already increased 6%. But Rivers said they would keep renting .
Because of the uncertain L.A. housing market, she and her husband weren’t sure they would ever get their money back if they bought a house now, and they didn’t want to compromise.
“We can afford to rent a nice house,” she said. “But we couldn’t afford to buy a nice house.”
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More vacancies
Average rents and occupancy rates for rental units in the first quarter of 2007, by county and overall in Southern California
*--* % change Change Average from Occupancy from Area rent year ago rate year ago Los Angeles $1,642 +7.7% 95.9% -0.1% Orange 1,531 +6.0 95.0 -0.4 Ventura 1,525 +8.9 94.3 -1.8 San Diego 1,327 +5.2 94.1 -1.1 San Bernardino 1,154 +4.4 94.1 -0.8 Riverside 1,138 +4.1 89.7 -4.2 So. Calif. 1,446 +6.0 94.5 -0.9
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Sources: RealFacts
