For those who question reports showing that Southern California landlords are in price-cut mode, let me offer a slightly different – and newer – snapshot of what’s up with local rents.
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My trusty spreadsheet had a harder time identifying rent declines when reviewing August rent data for 57 Southern California cities provided by ApartmentList. These price estimates, a combination of statistics from the government and ApartmentList’s listings for apartments and houses, tracked the overall one-year change in rents for one- and two-bedroom units.
While there was no widespread, major rent hikes, the stats suggest a possible end to noteworthy discounting in many cities. Consider August’s results vs. March, just five months earlier.
Across Southern California, ApartmentList’s overall rent indexes in the year ending in August declined in 23 of 57 cities, rose in 32, and were unchanged in two. So, we have good news for tenants in 40% of the region.
However, back in March, rents were down in 62% of the region’s cities.
Whatever this change represents – a rent bump or blip – let’s note that regional pricing is making a thin move.
Southern California’s overall rent indexes across 57 cities averaged a 0.3% year-over-year gain in August, compared with a 0.6% decline in March.
Split picture
This summer’s minor rent swing may be tied to economic stability rather than a major shift in business conditions.
Yes, some landlords still offer discounts to fill empty units, as rental supply is up in certain parts of Southern California due to a modest uptick in construction.
But other landlords see higher demand for their rentals due to the region’s slow but steady job growth, plus there’s the long-standing inability of homebuyers to find anything affordable.
Curiously, landlords are more likely to be discounting in the region’s lower-cost communities. You see this when you compare the 10 Southern California cities with the biggest one-year rent dips with the 10 with the biggest gains for August.
Average one-bedroom rents in the cities where rents tumbled were 25% lower than those in cities where rents jumped. For two-bedroom rentals, the gap was 22%.
This is a reminder that despite all the talk of a certain level of economic resilience, individual outcomes are split, with those of lesser means often hit harder.
Just consider the region’s price-swing extremes relative to median household incomes.
Rents in Aliso Viejo, where average incomes run $141,000, are up 5.1% in a year – the biggest gain. In Pomona, where incomes average $89,000, rents fell by 5.1% – the largest decline.
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It could be worse
In August, the typical Southern California tenant paid an average of $2,020 a month for a one-bedroom and $2,440 for a two-bedroom across the 57 cities.
Dare I mention the financial hurdles a local house hunter faces?
By one calculation, a Southern Californian homebuyer would have had to shell out $4,600 a month for a median-priced condo, which cost $665,000 in May.
That’s more than double the typical local rents, and it covers only the mortgage, property taxes and insurance. Do not forget the $67,000 in cash for the down payment required to make this purchase work.
Market math
Here is another subtle reminder that the odds are shrinking for a Southern California tenant seeking a rental bargain.
Just three of Southern California’s five rental markets saw prices fall in the past year through August, compared with four in March.
Geographically speaking, discounting is more intense the farther north you go. Just peek at those pricing patterns, with the five markets ranked by their share of cities with rent one-year dips:
– Inland Empire: Rents were down in 8% of its 13 cities in August. Quite the change from March, when 75% of the markets had rent declines. August’s one-year average price move was a 1.3% increase, compared with March’s 0.7% decline. August rents were $1,690 for one-bedroom units and $2,030 for two-bedroom units. Pricing extremes? Colton, up 4%, to Fontana’s 2.6% dip.
– Orange County: declines in 13% of 16 cities in August vs. 27% in March. August’s one-year price move: 2.1% increase in a year vs. March’s 0.6% gain. August rent: $2,380 for one bedroom and $2,840 for two. Pricing extremes? Aliso Viejo, up 5.1% to Santa Ana’s 2.1% dip.
– San Diego County: Declines in half of its eight cities in August vs. 63% in March. August’s one-year price move: 0.1% drop in a year vs. March’s 1.8% decline. August rent: $1,840 for one bedroom and $2,240 for two. Pricing extremes? Carlsbad, up 1.7% to Escondido’s 2.5% dip.
– Ventura County: Declines in 80% of five cities in August vs. 80% in March. August’s one-year price move: 2.4% drop in a year vs. March’s 1.9% decline. August rent: $2,010 for one bedroom and $2,410 for two. Pricing extremes? Thousand Oaks, up 0.1%, to Oxnard’s 3.7% dip.
– Los Angeles County: Declines in 80% of 15 cities in August vs. 85% in March. August’s one-year price move: 1.6% drop in a year, same as March. August rent: $1,970 for one bedroom and $2,460 for two. Pricing extremes? Torrance, up 1.6%, to Pomona’s 5.1% dip.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
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