LOS ANGELES (CBSLA.com) — Rising home values and an increased demand for rental properties are expected to keep pushing rent prices steadily upward over the next two years, according to a study released Tuesday.
New data compiled by the University of Southern California's Lusk Center for Real Estate showed nearly 6,700 new units were completed in Los Angeles, Orange and San Diego counties and the Inland Empire between the second quarters of 2012 and 2013 — a three-year high — even as the market absorbed nearly 11,900 units.
According to the study, Los Angeles County had the second-lowest vacancy rate at 3.2 percent, down 10.6 percent. On average, renters countywide paid an average of $1,435 per month and had the largest rate of increase at 2.86 percent.
The vacancy rate for Orange County was also at 3.2 percent, down 12.4 percent; and the Inland Empire was 3.6 percent, down 17.3 percent.
The sharp rise in demand is being primarily driven by "deteriorating home affordability," according to Richard Green, director of the Lusk Center and co-author of the study.
"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."
Santa Monica had the highest average rent price at $2,328, while Victorville had the lowest at an average of $755.
The study also found the Crenshaw sub-market was the only one with lower average rent in 2013 by a drop of 0.39 percent, while Beverly Hills had the highest percentage increase at 7.6 percent — a trend Green predicted could slow somewhat for some parts of the Southland.
"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," Green said. "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."
Click here to read the full 2013 USC Casden Multifamily Forecast.
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