LOS ANGELES (Business Wire)- The outlook for SoCal apartment markets is mixed this year with rents declining up to 3.5 percent in Los Angeles and Orange counties, staying flat in Riverside and San Bernardino Counties, but inching upwards thanks to a better employment outlook in San Diego County, according to the latest Casden Real Estate Economics Forecast from the University of Southern California Lusk Center for Real Estate.
"Overall, Southern California will not see sustained increases in rents until the greater economic health of the region improves, but renters in San Diego may experience the kind of slight increase that comes when jobs return and housing is still too costly for renters to become buyers," said Tracey Seslen, Ph.D., co-author of this year's Casden Multifamily Market Forecast. The future health of the Southern California multifamily market continues to be shaped by jobs, housing prices, the "shadow" market of rental homes and condos, and new construction, Seslen explained.
While housing prices have dropped precipitously due to the surging rate of foreclosures in the Inland Empire region of Riverside and San Bernardino counties, the low-cost homes are being snapped up by all-cash buyers, not renters, who often lack 20-percent down payments and the income needed to qualify for a mortgage, according to Richard K. Green, Ph.D., director of the USC Lusk Center and co-author of the Casden Forecast. "Housing is more affordable across the region, but low consumer confidence is keeping many first-time buyers on the fence and move-up buyers that lost equity are staying put. That opens the door for an increase in rents," he added.
Los Angeles County is another matter: the unemployment rate hovers at 12.3 percent and plenty of inventory stands empty thanks to new luxury condos being turned into rentals. In Orange County, average rents will decline at a slower pace and new projects in Anaheim and Irvine will continue to attract renters priced out of the housing market. San Diego will outperform the other SoCal markets in rental and vacancy rates as a steady stream of defense contracts and strong growth in the biotech industry buoy the region's economy.
The Casden Multifamily Market Forecast analyzes new building permits, leasing activity and employment data using information from MP/F YieldStar, Hanley Wood and other sources. A complete summary of the 2010 Casden Multifamily Market Forecast can be found online April 9, 2010 at www.usc.edu/casden. Some highlights from this year's report:
Los Angeles County
- 2010 rents to decrease an average 3.5%
- Vacancy rates to decrease as the shadow market of homes and condos for rent is absorbed by buyers
- Job losses in the construction, manufacturing, trade and government sectors will continue to hold down purchasing power of renters
- Average rents are highest in trendy West LA at $2,089/month
Orange County
- 2010 rents to fall an average 2.5%
- Oversupply of new apartments in Anaheim and Irvine could keep a lid on rents
- Home prices remain some of highest in the state, keeping apartment vacancy rates low
- OC's substantial entertainment, retail and dining amenities and skilled employment base will continue to sustain the region's economy
Inland Empire - Riverside and San Bernardino Counties
- 2010 rents decline 1% or less depending on submarket
- Highest rents at $1,204/month are in markets closest to LA -- Upland, Ontario and Rancho Cucamonga
- Lack of new construction leads to falling vacancy rates and nearly flat rental rates through the end of 2011
- Strong shadow market of homes-for-rent disappearing as investors purchase large blocks of foreclosures; holding on until stronger housing market returns
San Diego County
- Only SoCal market to see rent increases in 2010 - an average of 0.7%
- Lowest vacancy levels in region thanks to high-priced homes and costly rents for shadow-market homes and condominiums
- Rents continue to inch upwards as local economy steadily improves with more jobs tied to growth in biotech and government
- Highest average rents are in North County Coastal communities at $1,711/month