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Rent Climbs in SoCal

If your client is renting and they are thinking about “stepping up” to a better apartment; that may not be a good idea. This post below is bad news for renters relocating to new digs, as vacant units are in short supply. The only relief is that more vacant units become available after the eviction moratorium ends. SoCal Rents 17% Higher in 1st Quarter 2022 Landlords sought 17-18% increases for vacant units in O.C. and I.E. during the year’s first quarter.  New SoCal apartment figures show few “vacant” units available, and rent hikes for those units have skyrocketed into double digits across the region. During the first quarter of 2022, vacancy rates in the region lingered near two-decade lows, allowing landlords to boost their asking rents. Orange County’s average rent for a vacant unit jumped 18.2% from the year before, hitting a record-high average of $2,476 per month, The Southern California News Group composite of three leading apartment indexes shows: That’s up to $381 a month from the first three months of 2021 — and it’s $988 a month higher than in 2010. Inland Empire rents rose almost as fast, climbing 17.4% year over year from early 2021 to a record-high average of $1,941. After seeing rent drops during the pandemic, Los Angeles County landlords asked 12.8% more for a vacant unit in the first quarter, with a record-high average of $2,332. The reason is more tenants are moving out on their own. “It’s young adults moving out of a parent’s home or moving out of a roommate situation.” Meanwhile, vacancy rates averaged 2.4% in Orange County and the Inland Empire and 3.1% in L.A. County, the SCNG composite shows. “We’ve never seen occupancy this high,” said Chris Porter, chief Irvine-based John Burns Real Estate Consulting chief demographer. Porter noted rising employment, increased wages, and stimulus checks put money in people’s pockets, incentivizing them to move out. The composite figures are average first-quarter numbers from CoStar,Moody’s Analytics-Reis, and RealPage. Since their landlord surveys tend to focus on larger, professionally managed apartment complexes, their averages tend to be higher than smaller buildings operated by mom-and-pop landlords. SoCal isn’t alone in seeing such rent hikes amid a national housing shortage, a recent report by Yardi Matrix said. But the region’s pace of rent hikes is a tad faster than the national average of 14.3%, according to Yardi. Yardi’s data showed O.C.’s average rent was 19.7% in April, the sixth-highest percentage gain among the nation’s top 30 metro areas. The Inland Empire’s rent hikes ranked 13th in April at 16.8%, and L.A. County’s ranked 19th at 12.7%. “Explosive rent growth over the past year was driven by pent-up demand, growing household formations, and a large undersupply of new units,” Yardi’s April multifamily housing report said. Meanwhile, the demand for housing is evolving High-income and older households increasingly rent more compared to previous decades. Rising prices are squeezing out homebuyers, competition from investors for rentals, and people buying second homes.” ‘Increase Like No Other.’ Apartment tracker surveys tend to be higher than the overall market because they’re based on rents for newly available units and don’t include rent hikes for existing tenants who renew their leases. Porter said. Last quarter, SoCal rent hikes for new leases were two or three times greater than lease renewals. However, some existing tenants complained that they also see hefty rent hikes when renewing their leases. A new state law capping rent hikes at 5% plus inflation doesn’t apply to buildings built within the past 15 years. Smaller Hikes Ahead Porter said that the long-term outlook is for rent hikes to ease over the next few years, but rent drops aren’t expected. Yardi’s latest report forecasts O.C. rent hikes will moderate to 6.2% by next April, with hikes of 9.1% in the Inland Empire and 7% in L.A. County. During the pandemic, more people moved out of denser, urban areas of L.A. County to the Inland Empire, where they could rent larger homes for less while working remotely. Rents decreased year over year in L.A. County from the spring of 2020 through the winter of 2021. But they started rising last summer as the pandemic eased and more employees returned to their worksites. Rents were up 6.7% last summer, 10.2% last fall, and 12.9% this past winter. Meanwhile, rents are rising even faster in Orange County and the Inland Empire, with the biggest gains over the past year than in the previous 20 years, according to CoStar figures. Demographics may explain why rents are rising faster in the suburban counties rather than in L.A., with millennial tenants aging into their 30s and 40s, Porter said.  “Now, as they get into their 30s, they tend to go more suburban,” he said. I think Covid just accelerated that already occurring …

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Rising Rent Across The Country

Renters in California aren’t the only ones feeling pain in their rental market. Rents Climb To ‘Insane’ Levels Across U.S. Rents have exploded across the country, causing many to dig deep into their savings, downsize to subpar units or fall behind on payments, and risk eviction now that a federal moratorium has ended. In the 50 largest U.S. metro areas, median rent rose an astounding 19.3% in December 2021 from a year earlier, according to a Realtor.com analysis of properties with two or fewer bedrooms.  “Tampa, Orlando, and Jacksonville — and the Sun Belt destinations of San Diego; Las Vegas; Austin, Texas; and Memphis, Tenn., all saw spikes of more than 25% during that period. Rising rents are an increasing driver of high inflation that has become one of the nation’s top economic problems. Labor Department data, which cover existing rents and new listings, show much smaller increases, but these are also picking up. Rental costs rose 0.5% in January from December; the Labor Department said last week. It was the most significant increase in 20 years and probably will accelerate. Economists worry about the effect of rent increases on inflation because the big jumps in new leases feed into the U.S. consumer price index, which is used to measure inflation. Inflation jumped 7.5% in January from a year earlier, the most significant increase in four decades. Although many economists expect that to decrease, rising rents could keep inflation high through the end of the year because housing costs make up one-third of the consumer price index. Experts say many factors are responsible for astronomical rents, including a nationwide housing shortage, extremely low rental vacancies, and unrelenting demand as young adults continue to enter the crowded market. Whitney Airgood-Obrycki, the lead author of a recent report from Harvard University’s Joint Center for Housing Studies, said there was a lot of “pent-up demand” after the initial months of the pandemic when many young people moved back home with their parents.  Starting last year, as the economy opened up and young people moved out, “rents really took off,” she said. , According to the U.S. Census Bureau, rental vacancy rates during the fourth quarter of 2021 fell to 5.6%, the lowest since 1984. Meanwhile, the number of homes for sale has been at a record low,contributing to ballooning home prices that have caused many higher-income households to remain renters, further increasing demand. Construction crews are also trying to bounce back from material and labor shortages that made a preexisting shortage of new homes even worse at the start of the pandemic, leaving an estimated shortfall of 5.8 million single-family homes, a 51% leap from the end of 2019, Realtor.com said. And compounding all of this is the increasing presence of investors. A record 18.2% of U.S home purchases in the third quarter of 2021 were made by businesses or institutions, according to Redfin, as investors targeted Atlanta; Phoenix; Miami; Charlotte, N.C.; and Jacksonville, Fla. — popular destinations for people relocating from pricier cities. Let us help you find the perfect rental property in your budget.For more information on real estate investment; or to see what your rental may be worth with a rental rate calculator, contact True Property Management today – …

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SOUTHERN CALIFORNIA’S BUSIEST MARKET IN OVER A DECADE

Year-end figures show it was the busiest year for home sales in over a decade years, with the biggest price leap on record. In December of 2021, the median price of a Southern California home hit a record high for the 10th time in the past 12 months, figures reported by DQ News on Friday, Jan. 21.   Sales in December moderated, as they usually do in a typical year. However the total for the year was the highest since 2006. Home prices had an annual gains of 16.3%, not just in December but in 2021, meaning last year had the highest price appreciation rate since 2013. Record high median prices also were recorded in four of the six counties in the region: Los Angeles ($805,000), Orange ($935,000), Riverside ($550,000) and San Bernardino ($485,750). The reasoning for the current state of the housing market in Southern California the demand far out weighs the supply. As well, agents have tagged the three main reasons for 2021’s extreme performance: record-low mortgage rates, record-low for-sale inventory and very high demand, driven by millennials aging into their prime home-buying years. State-wide 72% of home are being sold for above asking price, this is resulting in many potential buyers have turning to renting until the market calms down. …

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