Kevin McCabe, president of property management firm Century West Properties, said that rather than rent apartments or houses, many people are choosing to add housemates and roommates or are moving back in with parents. At the same time, a glut of foreclosures gives renters many choices.
To entice renters, McCabe has been lowering rents 5% to 10% if a property has been vacant for at least 30 days.
He recently used Craigslist, a popular community website, to advertise a one-bedroom apartment on Federal Avenue in West L.A. Price: $1,495 a month. When no one bit, he dropped it to $1,395. When the vacancy hit the two-month mark, McCabe dropped it another $100 and found a renter.
A two-bedroom apartment on Mayfield Avenue in Brentwood that rented for $2,395 a year ago is now listed for $1,995.
Even landlords in pricey Santa Monica are squeezed, said Kevin Miller, Westside Rentals' head of operations. The rent for a three-bedroom condominium unit listed with the company just dropped from $2,950 per month to $2,495, he said. In addition to lower rents, some landlords are offering incentives such as a free month's rent. One Valley Village building promises free iPod Nano music players to new renters.
Low rents could have negative implications for homeowners as well. That's because if it's significantly cheaper to rent than buy, fewer people will want to purchase homes. And that means the price of houses and condominiums could continue to tumble.
"Lower rents make buying less attractive," said Thomas Davidoff, a UC Berkeley economist who studies housing.
Rental and sales listings show rents in many areas are close to the monthly price that a homeowner would pay on a mortgage.
Listed for rent on Craigslist, for instance, is a three-bedroom, 990-square-foot North Hollywood house for $2,300 per month. A few blocks away, a similarly sized house is for sale at $460,000. With a 20% down payment and a 5.25% rate on a 30-year mortgage, the monthly payment plus property taxes for the house for sale would be about $2,500.
In Santa Monica, the condominium listed for a monthly rent of $2,495 is near smaller units for sale at $649,000. The monthly payment for one of the units for sale, with a 20% down payment and a 5.25% interest rate plus property taxes, would be about $3,400.
But homeowners also have to pay for repairs and maintenance, and they have to come up with hefty down payments. That can make renting more desirable than buying, despite tax benefits and the possibility that a purchased home could increase in value if the market recovers.
The recession will probably pull rents even lower, Davidoff said, further delaying a real estate recovery. "There's weakening demand for all types of housing due to the economic downturn," he said.
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peter.hong@latimes.com
david.pierson@latimes.com
