Article by Dereck Andrade A predictor of Southland apartment rental unit prices indicates the average monthly rent in Los Angeles County is expected to rise by 12 percent in the coming months, according to a USC real estate study to be released today. Average monthly apartment rents in Orange, Riverside and San Bernardino counties are also expected to increase from between 8 percent to 15 percent through the third quarter of 2004, according to the Casden Real Estate Economics Forecast by the USC Lusk Center for Real Estate. "Tenant incomes won't increase as fast as rents, so some may have to budget more for their rent payments,' said Raphael Bostic, director of the USC Casden Forecast. "Apartment market conditions will remain extremely tight across the Los Angeles region well into 2004.' It's more sobering news for apartment renters, some of whom are caught between not being able to afford a home because of rising prices while at the same time being squeezed by apartment owners bent on taking advantage of a statewide housing shortage. "The problem is that when new homes are being built, they are even more expensive,' said Jack Kyser, a senior vice president and chief economist for the Los Angeles County Economic Development Corp. "I believe that by the end of the year, the Fed will start to increase interest rates from 1.25 percent at least a quarter point,' Kyser said. "If that happens, people will become more cautious about home prices and the home sellers might be more willing to deal once some of the steam leaves the market.' But as the affordability index for first-time homebuyers continues to fall it's now at 35 percent while median home prices continue to rise, apartment rental units are becoming less of an option and more of a forced necessity. The minimum household income needed to purchase a median-priced California home valued at $328,310 in November was $78,630, based on a typical 30-year, fixed-rate mortgage at 6.08 percent and assuming a 20 percent down payment, according to the California Association of Realtors. G.U. Krueger, a real estate expert with the Institutional Housing Partners in Irvine, said the numbers merely reflect a basic supply and demand. "You have a significant under supply in the apartment housing market in Southern California. That mismatch will push up prices of apartment rents, Krueger said.' The average rental price in L.A. County is $1,299 for a one- bedroom unit, according to Real Facts.com , a Novato-based real estate tracking firm. In Orange County, the average monthly rental price is $1,231 while renters in the Inland Empire pay $892 a month. Los Angeles County has the region's largest apartment market with 900,000 apartment units or nearly 71 percent of the total in the forecast's region. Rents in Orange County are expected to increase about 8 percent, according to the study, while rents in the Inland Empire are forecast to increase about 15 percent. High land prices, a lack of land for apartment construction, community resistance to multifamily development, and a shortage of subsidies for affordable rental housing have limited the supply of new units coming on the market throughout the Los Angeles region, the USC study said.
February 5, 2003