Jobs, immigrant influx expected to bring biggest local rent jump since '00.
By Hang Nguyen
Orange County rents will rise 6 percent this year and an additional 9 percent next year - the highest annual increases since 2000, a new report predicts.
The average for local rents will jump $76 to $1,344 by the end of this year and a further $121 the following year, to $1,465, according to a forecast released today by the USC Lusk Center for Real Estate.
The last rent hike bigger than that was in 2000, when the average rose about 14 percent, according to market tracker M/PF.
"Landlords should find the next two years pretty easy," said Raphael Bostic color>, the report's author. "Renters will have to tighten their belts a little bit more."
KEY FACTS
Studio apartment (efficiency)
• Projected 6% increase (end of 2004): $895
• Projected 9% increase (end of 2005): $975
One-bedroom apartment
• Projected 6% increase (end of 2004): $1,140
• Projected 9% increase (end of 2005): $1,242
Two-bedroom apartment
• Projected 6% increase (end of 2004): $1,479
• Projected 9% increase (end of 2005): $1,612
Three-bedroom apartment
• Projected 6% increase (end of 2004): $1,930
• Projected 9% increase (end of 2005): $2,104
Countywide
• Average rent: $1,268
• Projected 6% increase (end of 2004): $1,344
• Projected 9% increase (end of 2005): $1,465
Already, 2000 census figures show that a third of local renters pay 35 percent or more of their household income to the landlord.
In addition to predicting rent increases in Orange County, the USC report also analyzes past rent increases and their meaning for the local economy.
In the next two years, Bostic says, O.C. landlords will be able to demand substantial rent hikes because of higher demand and a tight supply of apartments.
Based on various universities' economic forecasts, he anticipates that the number of local jobs will grow 1.4 percent in 2004 and 3.3 percent in 2005.
Plus, there's an ongoing immigration influx to Orange County, a number that is greater than the volume of apartments being built.
These two factors will push the vacancy rate down to 3 percent at the end of 2005, Bostic expects.
That's a pleasant surprise for apartment manager Rick Roshan, who oversees 600 units in the county.
"I'm happy to hear that," he said about the forecasts for falling vacancy rates and rising rents.
The USC report also shows how demographic and economic patterns in the county have affected the rental market.
Over the past three years, rents for three-bedroom apartments grew 20 percent, pushing the average rent above $1,800 a month for the first time.
The reason: Demand for the bigger apartments has risen fast because of large immigrant families moving to the county, Bostic said.
Different economic factors affect the rents of studio apartments, which have grown 6 percent in the past year, to an average of $840 a month.
These tiny apartments are typically occupied by young, single people looking for jobs. These mobile tenants respond quickly to the swings in the economy, Bostic said.
Studio rents tend to move the way the general economy does, so in that sense the 6 percent rent increase is a positive sign, he says.
"The recent jump in rent levels for efficiency units may be a signal that jobs may be coming back into the marketplace," Bostic added.