New construction may be making a dent in rent hikes in the region, but not by much.
Asking rent for apartments were up an average of $50 to $92 a month last spring throughout Southern California, continuing almost seven years of continuously rising rents amid job and population growth, data from apartment tracker Reis Inc. shows.
Average asking rents hit record highs during the spring quarter, the data firm reported: $1,293 a month in the Inland Empire, $1,827 a month in Orange County and $1,829 a month in Los Angeles County.
Rents were up 2.8 percent from the year before in Orange County, equivalent to $50 more a month. In Los Angeles County, rents rose 5.2 percent or $92 a month year over year. And Inland Empire rents increased 5.3 percent or $64 a month.
“Both L.A. and San Bernardino/Riverside are seeing strong rent growth due to strong demand — from population and employment growth,” Barbara Denham, Reis senior economist, said in an email.
Orange County rent increases are “somewhat lackluster,” Denham added, because “suburban markets are seeing lower rent growth relative to their neighboring urban or (central business district) markets.”
Rising home prices also are making it difficult for many renters to become homeowners, increasing demand for apartments and other rentals, added Nicholas Dunlap, past president of the Apartment Association of Orange County.
“The tight for sale-market, the especially difficult barrier to entry for first time home buyers and the lack of new conventional/workforce housing continues to frustrate renters and buyers alike,” Dunlap said.
Los Angeles’ asking rent was the 10th highest among 83 large metro areas Reis tracks, followed by 11th-ranked Orange County. The Inland Empire rents were 24th highest out of the 83 metro areas.
New York still had the nation’s highest rent at $3,416 per month, followed by San Francisco at $2,861 a month, Silicon Valley at $2,435 a month and Boston at $2,064 a month.
New construction is starting to have an impact on vacancy rates in Los Angeles and Orange counties, said Carl Whitaker, real estate analyst for Axiometrics, another apartment tracking firm.
Orange County developers completed 5,700 new apartment units from the spring of 2016 through the spring of 2017, Whitaker said. Los Angeles County added 12,700 new units in that period.
While Los Angeles County’s vacancy rate of 3.3 percent was unchanged from the previous quarter, vacancies rose for the third time in a year to 3.5 percent in Orange County.
The Inland Empire, meanwhile, had the smallest amount of apartment construction, adding just 1,700 new units in the past year, and as a result had the region’s lowest vacancy rate: 2.8 percent.
“You’re starting to see that new supply chip away at occupancy,” Whitaker said.
The region’s vacancy rates were among the lowest in the nation with Orange County ranked 20th out of the top 83 metro areas, Reis figures show. Los Angeles County vacancies ranked 18th, while Inland Empire had the sixth-lowest vacancy rate.
“Markets like Los Angeles, Orange County and Seattle are more successful at keeping vacancies low,” Reis Chief Economist Victor Calanog wrote in his quarterly market report.