By Jodi Summers
It is official: Apartment rents have flattened out in Southern California, after two years of decline. This proclamation comes from the USC Lusk Center Casden Forecast. The forecast predicts that rents will remain flat for Orange County, San Diego County and the Inland Empire for the next eight quarters, with a slight decline in Los Angeles County. The report shares that this flattening is a sign of stabilizationâ€¦so good news-ish.
Los Angeles County is stabilizing. Comparing April 2011 vs. Apr. 2009, the median price of for sale properties is up 1% and the median price of sold properties has not changed.
Another positive sign, tenants and rent rates have become far more stable. The 2011 National Apartment Report from Marcus & Millichap notes that Los Angeles County vacancy rates will drop to 4.4% by yearâ€™s endâ€¦ andâ€¦ more good newsâ€¦ asking rents will reach $1,395 per month by year end, up 1.8%.
"Though there's evidence that rents have begun rising at the national level, the most positive news we have in Southern California is that rents have stopped falling after two years of negative growth," confirms Tracey Seslen, of the Lusk Center and co-author of the forecast.
Buyers continue to actively purchase multiunit properties. In Los Angeles County, comparing April 2011 vs. Apr. 2009, the number of under contract apartment properties is up 37%.
Savvy, liquid investors, have been have been investing in the L.A. County throughout the downtown. They know historically, one of the best time to make a real estate deals is around the time of a presidential election. Contrasting Apr-09 (President Obama had been in office note quite 3 months) vs. Apr-11, youâ€™ll notice the number of sold properties is down 14%.
Because of the inability to get loans, supply and demand issue has frustrated potential multiunit sellers. Many sellers refinanced instead of waiting on new buyers. Others, irked by bottom-feeder buyers, have chosen to sit on their properties. Compare Apr-09 vs. Apr-11 and youâ€™ll notice the number of for sale properties is down 32%.
Motivated sellers who price strategically will sell, as the volume of properties for sale has dropped. Compare Apr-09 vs. Apr-11 and youâ€™ll notice that the average months supply of inventory is down -55.1% - from 12.1 months of inventory to 5.4 months. Parity is at 3.7 months of inventory.
The Casden Forecast identifies five key factors needed to guide the future health of the SoCal multifamily market: employment;
1.Â Â Â High oil/gasoline prices, which encourage employees to move closer to their workplaces.
2.Â Â Â Continued reduction in multi-family construction activity;
3.Â Â Â Decreased apartment demand brought on by lower home prices;
4.Â Â Â Competition from shadow-market inventory
5.Â Â Â Employment
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