A growing number of renters will descend on the Los Angeles suburbs in the year ahead, a trend that will fuel more price hikes amid shrinking inventory.
Meanwhile, some pockets of Downtown Los Angeles that suffered the most following months of Covid restrictions will continue to see falling prices and rising inventory, according to the University of Southern California’s “Casden Real Estate Economics Forecast.” Commercial Observer first reported its findings.
The annual study showed demand will be strongest in West Riverside County and the Rancho-Cucamonga/San Bernardino submarkets, which could each see close to 10 percent rent price growth. Researchers noted that the market volatility the pandemic created has given them less confidence than usual in their projections.
Tightening vacancy is already driving multifamily activity in the Inland Empire, which has traditionally been one of the less expensive markets. Significant price growth is expected to continue there, according to the report. Average rent prices in the Inland Empire rose by 8.5 percent in the first quarter of 2021 compared to the same period the year before, according to separate data the Los Angeles Daily News analyzed. Vacancy also fell there, to 2.4 percent in Q1, compared to 4.1 percent in the same period in 2020.
Other areas that have benefited from renters’ need for more space include southern Orange County and Ventura County, the report noted, along with suburban San Diego County.
For the city of L.A., the pandemic-filled year battered the multifamily market, the Casden report noted.
The “large-scale move away from central cities to suburbs” led to a sharp rise in vacancy in areas like Downtown L.A., Koreatown and Burbank-Glendale. The report projected that trend could continue, along with a slight dip in rent prices, in Koreatown-Mid City, Inglewood and the Westside.
“The farther one gets away from the city of Los Angeles, the greater seems to be the potential for rent growth,” the report read.
Meanwhile, South L.A. — also a traditionally less expensive option — and Pasadena could see the strongest price growth in the immediate L.A. area, around 2 percent each.
Rent dynamics in those submarkets could shake out much differently if more people return to central submarkets, as vaccine distributions continue to lower the number of Covid cases, and as people become more confident going out.
The state saw a drop in population last year for the first time since 1850 due to Covid deaths, people moving out and fewer international residents entering. But home prices have surged, an indication that there is strong demand to live in the state among those with the means.
California has long been bedeviled by a housing shortage and the report noted the state’s drop in population will continue if “the housing stock fails to grow beyond replacement levels.”
That trend may lead to “conversions of some rental property to owner property,” according to the report, “reducing the supply of rental housing and reducing rental vacancy rates.”