Los Angeles
Los Angeles apartment rents are officially stagnant, after a year of nominal ups and downs. According to a new report from Apartment List, apartment rents in Los Angeles were flat month-over-month at an average of $1,760 for a two bedroom. Rent growth is also flat for the year; however, some standout submarkets within the region continue to see rent growth. Stagnant rent growth is the current trend for rents in Los Angeles.
"Los Angeles rents seem to have reached their ceiling for the time being. On one hand, the city of Los Angeles had strong construction in 2018, increasing supply," Igor Popov, chief economist at Apartment List, tells GlobeSt.com. "On the other, demand is slowing as families look for more affordable places to live. Many renters are moving further inland in search of lower rents, and any market exodus eases rent pressure."
While Los Angeles rent growth has stalled, the national apartment market continues to see rent growth. According to the apartment, national apartment rents increased 1.4% for the month of December, at an average of $1,191 for a two bedroom. The discord has a lot to do with changing market dynamics. "The composition of the market is changing, so while renters aren't seeing large rent hikes when their leases are up, new construction tends to come with a high price tag," says Popov. "Many new buildings fall in the luxury segment, so they command high rents."
Not all markets have seen stagnant rent growth. Eight of the largest 10 cities in Los Angeles are still seeing rent increases, including Stockton and Anaheim. "The Los Angeles economy is strong, but the city expects to see an elevated level of multifamily supply come on line," says Popov. "I expect that rents will be reasonably steady, which is a huge relief for renters who are already stretching their pocketbooks."
The slowed rent growth is attached to predications about the next recession—particularly that one is coming next year. "Today, the conversation has turned from 'wild rent growth' to 'when is the next recession?, says Popov.'" "The real test for property values and cap rates will be in the size, timing, and source of the next recession."
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Kelsi Maree Borland
