Demand for Southern California apartments is expected to keep rents rising for two more years, according to a study released today by USC's Lusk Center for Real Estate.
In Los Angeles, Orange and San Diego counties and the Inland Empire, nearly 6,700 new units were completed between the second quarter of 2012 and this year's second quarter -- a three-year high.
But at the same time, the market absorbed nearly 11,900 units.
The demand is being driven by "deteriorating home affordability," according to Richard Green, director of the Lusk Center and co-author of the study done with USC's Vincent Reina and Selma Hepp of the California Association of Realtors.
"Despite marked improvements in employment and the overall economy, the rapid increase in home prices and interest rates are pricing first-time homebuyers out of the local market," Green said. "As more and more of these households become renters instead of buyers, we will continue to see fewer vacancies and higher rents."
According to the study:
- San Diego had the lowest vacancy rate in the second quarter of this year -- 2.3 percent, down 37.1 percent from a year ago.
- The second lowest vacancy rate was in Los Angeles County at 3.2 percent, down 10.6 percent; Orange County was 3.2 percent, down 12.4 percent; and the Inland Empire was 3.6 percent, down 17.3 percent.
- L.A. County renters pay an average of $1,435 per month and had the largest rate of increase at 2.86 percent.
- The Crenshaw submarket, which experienced a 0.39 percent drop in average rent, was the only submarket with lower average rent in 2013. Beverly Hills had the highest percentage increase at 7.6 percent.
- Orange County had the highest average price, $1,572, up 2.8 percent.
- San Diego County rents were up 2.75 percent to $1,388, while Inland Empire rents rose 1.9 percent to $1,059.
"Over the next two years, the growth rate for rents will be slower for Los Angeles and Orange County and slightly higher for the Inland Empire and San Diego. Vacancy rates will decrease across all four markets, however, it will decrease at a slightly slower rate in Los Angeles, the Inland Empire and San Diego, and at a higher rate in Orange County," Green predicted.
The El Cajon-Santee-Lakeside submarket had the lowest vacancy rate, 1 percent, while Victorville had the highest, at 7.8 percent. The Carson-San Pedro-East Torrance-Lomita submarket had the largest increase at 33.3 percent.
Victorville had the lowest average rent, $755. Santa Monica had the highest, $2,328.