Southern California remained the West's hottest apartment market as rents continued to climb well above the inflation rate, according to a quarterly survey to be released today.
The pace of rent increases accelerated in recent months, according to the survey, as the supply of rental units barely budged while rising home prices continued to make homes less affordable.
For The Record
Los Angeles Times Friday April 22, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 52 words Type of Material: Correction
Apartment rents -- An article in Thursday's Business section about rent increases said Southern California apartment rents rose an average of 5.2% during the first quarter. In fact, rents rose 5.2% year over year in the first quarter, compared with 3.9% in the same period in 2004, according to research firm RealFacts.
For The Record
Los Angeles Times Saturday April 23, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 52 words Type of Material: Correction
Apartment rents -- An article in Thursday's Business section about rent increases in Southern California incorrectly said a survey of large apartment complexes found that the average monthly rental rate in Los Angeles and Orange counties was $1,138 during the first quarter of 2004. It was $1,318, according to data tracker RealFacts.
Apartment rents rose an average of 5.2% throughout most of the region during the first quarter, compared with 3.9% a year ago, said RealFacts, a Novato-based research firm that tracks rents and occupancies among 11,000 apartment complexes of 100 units or more.
In Los Angeles and Orange counties, the average monthly rental rate was $1,397 in the quarter, compared with $1,138 a year earlier, the survey said. RealFacts found that rents rose in 24 of the 29 markets it surveys.
Of the markets in the West, the Inland Empire saw the biggest jump in rents, 6.6%, RealFacts said. In Riverside and San Bernardino counties, the average rent was $1,022 during the period, compared with $959 a year ago.
The main driver of higher rents is the classic principle of supply and demand.
Demand is high and the supply is tight throughout the Southland, making it easier for landlords to hike rents.
Southern California "is one of the few places that's consistently shown an in-migration of people who need a place to live," said Gerald Cox, RealFacts' director of marketing.
"That's keeping the occupancy rates relatively high to the point where other places would be envious," Cox said.
During the first quarter, Southern California's occupancy rate was 95%, a statistic that has been fairly stable since the mid-1990s.
One reason local apartment owners rarely see vacancies is because there are relatively few new apartment complexes being built. A recent study by USC's Lusk Center for Real Estate found that in Los Angeles County, for example, the number of apartment units is about 1 million. The total inventory has been growing at less than 1% a year for the last five years.
There is a growing number of apartment units coming off the market as they are converted into for-sale housing in the form of condominiums.
Over the last year, condo conversions have escalated, Cox said. According to RealFacts, about 110 large apartment buildings in the West were transformed into condo complexes last year, the majority of which were in Southern California.
The burgeoning trend of conversions stems largely from the region's hot real estate market. Rising home prices have forced many prospective buyers to turn to more affordable options, such as condominiums and town houses.
But lately, condo prices have been appreciating in some areas as fast as those of single-family homes. As of March, the median price for condo resales rose 18.5% to $371,000 in Southern California, while the median price for single-family homes increased 19.4% to $455,000, according to DataQuick Information Systems.
The growing gap between affordability and prices "will limit many new residents to the rental market, allowing apartment owners to continue raising rents in 2005" around the Southland, according to a report by Marcus & Millichap Real Estate Investment Brokerage Co.