LOS ANGELES (AP) -- Apartment rents in Southern California are expected to increase as much as 9 percent in the next two years in a housing market lacking vacancies, according to a university study. The study, conducted by the Lusk Center for Real Estate at the University of Southern California, blames the projected increase on the region's strong economy, population growth and shortage of housing units. It focused on Los Angeles, Orange, Riverside and San Bernardino counties. "I think people know what the solution is. We have to add more units," said Raphael Bostic, the study's director. Last year's average monthly rent of $1,300 in Los Angeles County is expected to increase about 7 percent, to $1,400 in 2005, according to the USC forecast. In Orange County, rents averaging $1,260 are expected to increase 9 percent next year. In two years, rents in the Inland Empire are going to climb 8.5 percent from an average of $900, the study said. Bostic said cities need to build more higher density projects, including apartments and condominiums, but noted those residential developments are often frowned upon by neighbors. In some parts of Southern California, fewer apartments are being built, and fewer are available to rent. In 1986, for example, builders pulled permits for 52,969 units in Los Angeles County. Last year, permits were pulled for 11,096 units. Meanwhile, vacancy rates remain at about 4 percent in Los Angeles County and the Inland Empire. Last week, the spring 2004 survey by MarketPointe Realty Advisers showed apartment rents in San Diego County still climbing, although the rate of acceleration seemed to be leveling off. The MarketPointe survey showed a monthly average rent of $1,138. Although that was an all-time high, it was only $15 higher than six months ago during the real estate information company's fall 2003 survey. This spring was also just 3.2 percent higher than spring 2003. MarketPointe also noted that of the 15,800 apartment units released in San Diego County in the past five years, 15,210 have been absorbed, or 96.3 percent. However, in the past six months, only 575 new units have been released, the lowest level since September 1998. The MarketPointe survey also noted that apartments renting for $800 or less are decreasing markedly with those asking $1,200 or more increasing. In the spring of 2004, there were 1,824 fewer apartment units at $800 or less than there were a year ago. In a related San Diego apartment survey last week, Burnham Real Estate reported San Diego County was a hot investment market in 2003. Sales activity here was at the second-highest level since 1989 with 1,090 apartment properties sold representing 17,459 units. The number of building permits for new apartments, however, rose only 8.3 percent to a valuation of $296.8 million for 3,164 units. "The San Diego multifamily market clearly reflects the fact that demand for affordable housing is outpacing supply," said George Carlson, a vice president and apartment specialist with Burnham.
April 2, 2004