Los Angeles property managers are experiencing some powerful economic trends affecting rental prices and vacancy rates.
LA has one of the lowest vacancy rates in the country, hovering around 4%. They are experiencing high foreclosure rates. According to RealtyTrac, LA has one foreclosure for every 113 households. In addition, they have a challenging real estate market. Home prices have continued to decline over the last year. KB Homes, one of the largest homebuilders in the US, expects California prices to fall another 10-15% in the next 18 months.
How do these factors affect property management and the rental market?
- Low Vacancy Rate- The supply is tight, prices increase
- Homes Foreclose- homeowner forced into rental, reduces supply, prices increase
- Housing Slump- would-be buyers rent until market is less turbulent, reduces supply, prices increase
Economics 101 tells us these things combined would cause rental prices to go through the roof. Los Angeles property managers can charge $2000 a month for an average two- bedroom rental property. How high can prices go?
There is one outcome of these economic factors favoring tenants. Los Angeles property managers are finding that property owners are placing more condominiums and homes in the rental market. Rather than having properties sit empty because they are not selling, investment property owners are hoping to collect rent to cover their costs. Will this addition to the rental property inventory keep rents stable over the next couple of years? Only time will tell.