A Decade of Rental Increases Has Ended
Dated: August 23 2020
Nationally acclaimed writers Jonathan Lansner & Jeff Collins publish the best “market driven” info compiled from the most trusted statisticians for the SoCal marketplace.
The coronavirus had a lot to do with decline
By Jeff Collins ..JeffCollins@scng.com
Almost 10 years of sustained rent hikes came to an end in L.A. & OC counties during the spring, in part to the virus & to new construction.
Following 39 quarters of increases, the avg. asking rent for an L.A. County fell $33 a month from spring to the winter quarter, dropping to $2,122.
L.A. County rent also dropped $1 from the spring of 2019.
By comparison, Los Angeles landlords had averaged a rent hike of $18 a month every quarter since the spring of 2010.
In OC, the average fell $27 from winter to $2,066 a month, the index showed.
The avg.increase from one quarter to the next had been $16 a month during the past decade. Rent increased from a year earlier, but by a mere $6.
Still, it was the first time since the spring of 2010 both counties experienced a quarter-to-quarter rent drop.
In Riverside and San Bernardino counties, apartment rents continued rising, but by the smallest margin in six years.
For San Bernardino County, rent averaged $1,574 per month, up $19.
“The Inland Empire economy has fared better because of the bigger role that product distribution plays.”
An uptick in vacancy rates is one reason rent is softening, experts and industry representatives say.
Willett said about 7,600 renter households moved out of their apartments in L.A. and OC counties this past spring.
“The prices are not going up because they’re not filling the units.” Some tenants are moving back in with their parents or are doubling up with new roommates, industry representatives said.
Some landlords are renegotiating leases to keep them from leaving.
And some neighborhoods are hit harder than others, added Daniel Yukelsol, executive director of the Apartment Association of Greater Los Angeles.
In some cases, renters are breaking their leases, with or without their landlords’ consent, to avoid going into debt.
Because more people are working remotely, some renters have become “digital nomads,” moving from city to city, Yukelson said.
“For example, Santa Barbara County is now seeing increased housing demand as Angelenos are looking for an escape from the worsening environment of the Los Angeles area.”
Others are fleeing to the Inland Empire, added Nicholas Dunlap, a Sr. VP at Irvine based housing provider Avanath Capital Management and a past president of the Apartment Association of Orange County.
“Losses in OC and L.A. are gains in the Inland Empire,” Dunlap said.
Decreases Forecast --- Rent drops are rare.
L.A. & Orange County rents decreased in just 14 of the past 103 years, according to Consumer Price Index rent figures.
A report by Yardi Matrix forecasts, however, projects that 2020 rent in SoCal 27 other U.S. metro areas and the U.S. as a whole will drop by 2021.
L.A. & Ventura counties are projected to see a rent drop of 3.1% from last Dec. 31, the report said.
Inland Empire rent is forecast to drop 3.4%, and Orange County rent is forecast to decrease by 0.5%, the smallest drop among 30 metro areas.
“The COVID pandemic ended years of healthy multifamily fundamentals,” said a companion report titled COVID- 19: A Game Changer for Multifamily.
“Demand has weakened, and renters are increasingly looking for more inexpensive (housing).”
Still, rents had been expected to level off before the pandemic hit because of new construction and because the economy had been expected to slow after 10 years of expansion.
Rent growth already started shrinking 5 years ago. “We were in late innings, or extra innings, of the cycle,” Dunlap said.
The region, and Los Angeles County in particular, also has been undergoing a building boom for the past few years.
RealPage figures show nearly 16,000 new apartments were completed in the four-county region this past spring — 10,000 of them in L.A. County alone.
Almost 38,000 more are under construction, more than 31,000 of them in L.A. County.
Because new apartments tend to have higher rents, many high-end units started offering concessions, i.e. move-in specials, to lure more tenants.
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