Apartment rents fall in Los Angeles County

Apartment rental rates are inching down. The Times' Roger Vicent reports on the findings of a new study at latimes.com:

The average rent in Los Angeles County fell almost 4% in 2008 as apartment occupancy rates dropped and new units came online. The decline should continue this year as more renters lose their jobs, according to the annual USC Casden Forecast expected to be released by the university today.

"In L.A. County alone, 41,000 people moved out of apartments last year compared to the 29,000 people who moved in during the last five years," said forecast director Delores Conway.

To keep their units occupied, some landlords are lowering rents or offering concessions for signing a lease, such as a month of free rent or a reduced deposit, she said.

Rents should level out in 2010 as the economy recovers, the report said. The average one-bedroom apartment in Los Angeles rented for $1,397 a month at the end of last year.

Is it just me or does that still seem like a lot to pay for a one-bedroom rental? More on specific neighborhoods:

The Westside remains the priciest, while Pasadena and Burbank are stable with little change in occupancy or rents. Rents in Hollywood and central neighborhoods such as downtown Los Angeles are being weakened by new condominiums that are being leased rather than occupied by owners.

The San Fernando Valley should continue to see lower occupancy rates and rents in the near term because of layoffs in the area.

I would be curious to know what sorts of deals, gimmicks or incentives L.A. Land readers are encountering in the rental market. Compared with the price tumble in the housing market, 4% sure seems minimal.

-- Lauren Beale

Thoughts? Comments?

Photo: A newly built development on Olympic Boulevard in Santa Monica has 365-square-foot "studio loft" apartments for rent at $1,327 a month. Credit: Jim Simmons

 

Comments

[dog-walker]

I rent a one bedroom in the Fairfax/Melrose area, which over the past several years has seen rents go lunatic. Lately, while car=napping little dog-walker II, I've been driving up and down the streets, counting for rent signs per block. In a neighborhood that has had very few vacancies in the recent past, I get a ratio of 3/1 or higher. Currently, on my street, there are 13 signs in a three block stretch.

My theory, landlords are just like sellers, sticky on the way down. And just like sellers, they'll never recoup the $$ they lose "waiting out" the market.

[Laker]

$1,397 for 1 bedroom is really too much. The problem is that many renters are ignorant or simply do not do research. It is also very hard to move, so people are trying to avoid this, and landlords know it.
I have some friends that seen their rent move down 10-20%.
I also know someone who just got a notice of rent INCREASE by 15%.... I told her that it is nuts, and that she should dump the place. They landlords of that apartment complex in woodland hills will see their place get emptied pretty fast...

But since rents were lagging by far the 300% appreciation in home price, they don't need to correct by 1/2....
Banks were not giving Option ARM stated income loans to pay rent....so rent was pretty much tied to incomes and supply and demand...
Today, income is down, supply is up and demand is up, so bottom line rent on average falling 5-20% is very much possible.

[Michael]

4% may seem like a small decline, but remember that during the boom rental increases only averaged a little over 4% while housing boomed double digits every year. I just rented an 1800 sq ft home in a great part of Glendale for $2600 that would cost me at least $700,000 to buy, even now. Renting is still the better deal. House prices will have to fall 20% more in the best neighborhoods for me to even consider buying.

[Chief]

Rents have fallen off the cliff in Downtown LA. It was 98% just last year at this time. It's currently 84% and going lower. I have been month to month since October. The past 4 years when my lease expired, I was issued a notice to renew my lease within 60 days at a higher rate or be forced to move.

This time, they sent me nothing! I live in a 600 unit apartment complex and at one point in December, half the units on my side of the floor were unrented(about 4 units). My neighbor left in November and it finally got rented out in March.

There are lots of great offer for 2 month frees with a 12 months lease...but I 'm still waiting for an even better deal. You can rent a brand new condo for $1300 now. Why pay $1500 mortgage,. $700 HOA, $400 Property Tax, and add insurance....you can do the math.

It's half the cost to rent versus buying when you add in the crazy HOA fee in Downtown LA. Check out the Bunker Hill Tower and Promende Condo Complex...$700 HOA a month. Crazy crap

[Mary Ellen]

The L.A. rents will still have to dramatically decrease to come in line with the low average hourly wage rate. That has always been a problem living in southern California...wages are NEVER in line with salaries. That is why so few people living in California ever get ahead is they are paying the majority of their salary for housing.

[tonylogan]

I got my rent in the valley lowered by almost 20% just by asking. Of course I also found comps that matched my asking price.

Rents are sticky on the way down because a lot of places are listed for rent at the price that it takes for the owner to cover their nut.

These places are now listed too high, and they stay on the market forever. Those are foreclosures in waiting.

The true way to see rent prices is to view not asking (wishing) prices, but to check and see what places are really renting for (follow up with a few craigslist ads until they actually rent to someone).

[SC2]

My rent was reduced by 25%, and I received one month free. Largest unit in very nice complex. Bargain compared to buying a house that loses 100s of dollars in value per day... Can't deduct property tax b/c of AMT, so with AMT, insurance and HOA (if applicable), that covers about 6-7 months of my rent. Haven't even touched actual mortgage payments, repairs, maintenance, etc...

[mike d.]

From what I've noticed rents are down much more than 4% across most of the Westside. We just rented out a one bedroom for $1150 that would have easily gone for $1400+ last summer (between Westwood and Century City). Most of the movement has been in the past 4 months or so.

I am encouraging everyone I know to look at what's out there when their lease comes due, and either move to something that's a better value or else hit up their landlords hard for rent decreases. After more than a decade of relentless rises in rents I don't see a problem sticking it to them.

As for my family, we just signed a lease on a house on the Westside that would have easily been $500+/month higher last summer. And like the commenter from Glendale, still far below what we'd have to pay per month for the mortgage, insurance, taxes etc., in order to buy the same place.

The falling rents aren't going to help home values either. The rent vs. own calculations still come down heavily on the side of renting in much of LA, even though home prices are falling.

[pasadena resident]

Laker's right. $1397 for a 1 bedroom place is way too much. 12 months ago, I used Craigslist to search. I found a room plus its own bathroom in a house in a nice part of Pasadena for $500/month [with no utilities!].

I suggest renters do an extensive search on Craigslist.

[MyLessThanPrimeBeef]

What happened to the increasing demand for rental, thus driving rents, from all those foreclosed homeowners?

[Louis Cabeza]

$1397 average rent for the whole city of Los Angeles seems unrealistic. Again fundamentals apply: Los Angeles' economy is largely small to mid sized businesses and manufacturers. There's not particularly a lot of high tech and alot of the manufacturing is based on low wages/skills. The better paying jobs in entertainment are leaving or disappearing. The building stock has a lot of really, pardon me, crappy buildings. Yes, they've been repainted, new kitchens put in and landscaped, but it's just lipstick on a pig. You've still got a 1950's courtyard building with paper thin walls and no insulation.

Craigslist is the last place to look for a rental and probably has helped to accelerate the rise in rental prices. Why? There is no charge for landlords, so why not put a high price on the unit and bring it down by very small increments? It's easy for renters to search and it's free for them, although I would argue that you end up paying in higher rents. The rental prices on pay services, like Westside Rentals, tend to be lower and right now they are much lower for comparable units. Bottom line: rental prices will depend on wages and people wising up a little.

[Chief]

It's from the NAR idiots and cheerleaders that do not understand basic economic.

Rent historically always align with the economy. No Job, no money to pay rent. There is no whacking financing in the rental market.

Unlike buying a house, you actually need down payment in the form of first month rent and a deposit before anyone will rent to you.

Unlike buying a house, most complex will not lease to you if the rent is greater than 33% of your income.

Unlike buying a house, you actually need good credit if you want to rent.

I remember back in 2000, I had to live in Extended Stay Hotel for 3 months because I had bad credit and no landlord would rent to me despite working full time. Finally was able to convice a landlord to have a co-signer with good credit(my brother) on the lease.

I should have went to ACRON and asked them to give money to buy a house instead of living in a motel!

"What happened to the increasing demand for rental, thus driving rents, from all those foreclosed homeowners"

[Nelcisco]

Primebeef,
one would think that an increase in foreclosures would drive up rental demands.
Laker, you said it best,banks weren't giving stated loans to pay rent which means full doc on rent, so with the spike in unemployment which means lower incomes or no income it makes perfect sense to lower rents across the board.

[Danny]

Lauren - rental declines of this magnitude are a MUCH more dramatic sign of the economic times. Remember: there was an enormous housing bubble. That thing was going to unwind 50% regardless of what happened to employment. And as such, declining home values don't really signal widespread deflation. On the other hand, there was no rental bubble. When rents go down - there are serious problems in the works.

[Tara]

I live near LAX. When it came time to sign my lease, I was supposed to have a rent increase. I was furious when I saw that the rents they were asking new tenants to pay were much lower. The only thing they would do for me if keep my rent where it was. I wish they could have dropped it lower - but I am happy with not having an increase.

[Jarson]

I live in Hollywood off Franklin. Our building has several vacancies and the manager has posted a sign offering $300 off my rent if I can bring in a friend to rent, and my friend will also get $300 off his second months rent.

[Jo]

I have just been speaking with a rental agent for Coldwell Banker who said rents are down 25% in some areas.

[NV]

Rents declined by more than 4%.
One way to mask the declining price is to offer 2-3 months free rental. Of course 12 months from now on you'll pay full price.
One thing that keeps the rents still high on the average is the large number of condo units that come on the market in the last year. These units couldn't sell, got changed to rental units and the asking prices are absolutely insane, sometimes 2x the asking price for comps in the neighborhood. How long that gig is going to last, and what's going to happen with the existing tenants when the reckoning comes due !?

[jphil]

it's neighborhood by neighborhood, just like the bubble and foreclosures. Out here in Venice declines have been minimal. Also lots of units are under rent control so still below market, even with a decline

[Westside Renter]

Rents on the westside have definitely come down. I started looking for a new 2+2 in the Westwood area last December. Condos and apartment owners that were asking $3000/month then, are asking $2600/month now, and their units are still sitting empty.

We ended up moving back to our old apartment building, the one we were forced to leave in 2007 when the building sold to a Big Shot Developer who was going to take it condo and sell 1400 square foot 2+2s in a 1970s building for $700K - $800K (in his dreams!). Mr. Big Shot Developer ended up selling the building at a huge loss and surprise, surprise the new owner converted the building back to rentals. We now live in a larger (although older) apartment and reduced our rent by 25%. I imagine it will be at least another 2 years before house/condo prices in the area come anywhere close to where they should be. In the meantime, I'll just wait it out it in my big affordable apartment.

[Martin]

I'm a Woodland Hills landlord. Last year, lessess from two units gave notice. It didn't take an econimist to tell me that -- after checking Craig's List and Westwide Rental ads -- the market had, indeed, dropped. I instantly lowered rents and quickly rerented the units. The numbers were as follows: (1) One bedroom went from $1340 to $1250 and (2) Studio suite went from $1275 to $1150.

These units, by the way, are located in a very residential, upscale south-of-the-boulevard neighorbhood. Had you asked me two years ago where rents were headed, I would have said that -- by this year -- the one bedroom would have been $1500.

[Endlessly renting in LA]

Did someone say "no rental bubble"? Really? My husband and I rented a 750 sf house with a tiny yard in a bad neighborhood in W W Adams for $1350 in 2006. The landlords (husband and wife owners) raised the rent to $1400 and then, a few months ago, to $1440. $1350 was bad enough when we started, given that two murders had occured nearby in the year prior, but there's your rental bubble--that house would have gone for $1000 or less in many cities. When they raised the rent the 2nd time, we sent a letter explaining all the reasons they should back off, but they didn't. We found a bigger place in a better neighborhood for $1050 and moved out . . . and now they are advertising it for $1450. And there's your rental bubble mentality still at work!

[Tim K.]

The methodologies for calculating average "rent" often overstates the actual rent people are paying. A few studies I've seen recently are based on surveys that are mailed out, mostly to professionally managed buildings. Those places almost always report rents much higher than average, for at least two reasons - 1, they never include incentives, and the property management owners are biased to list the "ideal" renting rate, not the actual rate they are giving to their clients. After all, it's in their own best interest to believe their rents are higher. 2., professionally managed buildings tend to have much higher turnover and tend to raise rents the fastest. The slowest rents to increase are those by small time landlords.

Other surveys do not measure actual rents but simply "asking" rents by looking at listings on craigslist. That's about as accurate as using MLS listing prices for the cost of homes - it's what people would like, but it's not what they are getting.

IMO, this study is most definitely flawed because I know for a fact that Pasadena has been dropping like crazy this last year, mostly in the high end. Heck, this is the city that has Indymac headquarters for cryin' out loud. It's been hit here as hard as anywhere. Pasadena has way more independent rentals than professionally managed buildings - places like Paseo claim their rents are stable, but in reality they are discounting like nuts. Those are the ones who are likely skewing the survey higher.

[SC2]

Endlessly... You need to move. Our rent was reduced by 25%. And our sq ft is much larger than yours, and our area is most certainly nicer. You can't complain if you don't try or don't look around.... Rent increases today are a clear signal to move. I do not konw anyone who has had their rent increased this year. Even our office space rent dropped by 40% b/c our lease was up and we were going to move until the landlord caved...

[SC2]

My bad - didn't finish reading your entire post... That guy is delusional.