From Press Enterprise 11/3/14
Average Inland rent rises 5.7 percent in September compared to a year ago, and another 9.9 percent increase is predicted by June 2016.
Rent has been on the rise in every market across the U.S., and the apartment scene in the Inland area is no exception.
Landlords in Inland Southern California with 100 or more housing units were asking for rent payments that were $64 higher – or 5.7 percent – as of September from a year earlier, apartment tracker RealFacts reported.
But even while the average asking rent rose to $1,200 in the Inland area, apartment and town home rental property is a bargain when compared with Los Angeles, Orange and San Diego counties.
The Los Angeles market, which includes Orange County, had asking rents averaging $1,857 a month, according to RealFacts spokesman Nick Grotjahn.
Other California hot spots – San Diego, Santa Rosa and Oxnard – asked prospective tenants to pay rent ranging from $1,579 to $1,683 as of September. “Everyone is trending up, and it’s been that way for quite a while,” Grotjahn said.
Vacancy levels have not been this low in many years.
The Inland Southern California occupancy rate, at 94.6 percent, is considered to be healthy. To a landlord, the complex is essentially fully occupied.
Asking rent does not soften typically until occupancy levels drop to the low 90s, Grotjahn said. With Inland occupancy levels in the 93.7 to 94.7 percent range over eight quarters, so there’s no reason to not increase rent, he said.
“We lack housing; it’s as simple as that,” said Beacon Economics founder Christopher Thornberg. “The pipeline is still trying to refill after the pullback by builders in the recession.”
With job growth coming back, demand for housing is increasing and rising rent reflects that, Thornberg said. Asking rent in Inland Southern California, in fact, is the highest its been in 20 years.
The average asking rent in Riverside County broke $1,000 per month in 2005. The $1,143 per month high was reached in 2007. The pre-recession peak in San Bernardino County that year was $1,167 per month.
For all of 2014, RealFacts expects average asking rent to be $1,151 per month in Riverside County and $1,211 per month in San Bernardino County.
At those prices, is the region at the tipping point?
Inland economist John Husing says the affordability factor is coming up in conversations more often these days, primarily because multi-family housing supply remains scarce.
Renters’ incomes are stagnant, so even though the economy and employment have improved, and net absorption and occupancy rates are moving in the right direction, affordability continues to worsen, USC Lusk Center Director Richard Green said.
Still, it is less expensive to live here than it is in coastal counties; and that’s a plus for the region, Husing said.
“Affordability is a question for each region to decide,” Grotjahn said. “But as long as the landlord can increase rent and not see a drop in occupancy, it’s still affordable. The tenants are still able to pay the incremental rent.”
Real estate tracking service RealtyTrac reported the median rent collected in 2013 on a single-family home in the Inland region was $1,577 a month.
The median household income in Riverside County was $52,621 that year and qualifying income to buy a house was in the range of $54,095 per year. Household income was $50,777 in San Bernardino County.
In Orange County, by comparison, household income was $71,983 and the qualifying income to buy a home there was $117,560.
The 2014 USC Casden Multifamily Forecast predicts rents will continue to go up as demand for rental housing outpaces the completion of new units.
USC is forecasting average rent in the Inland market will rise 9.9 percent by June 2016.
Future rent growth will be strongest in markets that have yet to enjoy the full benefits of the “echo effect” from primary driver markets like San Francisco, San Diego, Orange and Los Angeles counties, RealFacts owner Sarah Bridge said.
If rent gets too high in coastal markets, and job growth amps up in the Inland region, Grotjahn said workers may have no other choice but to move outward and commute longer.
“The markets to watch are in Southern California,” Bridge said.