By: Kelsi Maree Borland
June 25, 2019 —
Huntington Beach is currently leading the Los Angeles market for apartment rent growth. According to a new report from Yardi’s Rent Café, Huntington Beach apartment rents increased 10.8% year-over-year in May, the fastest rental rate growth in Southern California. Los Angeles and San Diego also saw rental rate increases, and Pasadena boasted the most significant month-over-month gain with a 1.7% increase in May.
“In the past 10 years, Huntington Beach and Pasadena have had around 5,000 renter households. We looked at apartment construction rates for the past decade and noticed both cities have seen below 2,500 new units delivered – still a healthier number than other areas in Southern California, like the Inland Empire,” Alexandra Ciuntu of Rent Café tells GlobeSt.com. “In addition, the supply that did come to completion in the past five years mostly constituted of high-end apartments. This could indicate that demand in this particular sector may have influenced average monthly rents in both areas as Huntington Beach had the most significant annual rent growth and Pasadena had the fastest monthly increase.”
Although Pasadena had the highest month over month rent growth in May, rents in the market have been volatile over the last six months. “Pasadena rents have fluctuated for the first half of the year whereas rent prices in Huntington Beach flatlined for six months following peak rental reason last year, only to steady climb starting March this year—consistent with seasonality increases nationwide,” says Ciuntu.
While several Southern California markets are seeing rent increases, some surprising markets actually experience declining rents, according to the report. Rent in Santa Monica, for example, dropped .8% in May year-over-year. “Although renters in Santa Monica now pay $30 less per month on average compared to last May, at $3,727 it’s still the most expensive SoCal renters market. Santa Monica is among those cities that, despite its desirability, has renters migrating to other nearby areas due to pricey monthly rents,” says Ciuntu.
The rental decrease could also be attributed to seasonal renters during the winter months. “Similar to 2018, rents in 2019 experienced a spike following December, only to drop at the beginning of what should be peak rental season,” says Ciuntu. “If 2019 continues to follow the rental trends of the past year, we could expect rents in Santa Monica to continue to drop month-over-month.”
Despite some city-specific losses in May, the overall rent trend in Southern California is positive. In accordance with the national trend, rents in Southern California are continuing to increase. Southern California monthly rents have increased consistent with seasonality patterns as average rents in the beautiful region witnessed an almost 4% increase year-over-year,” says Ciuntu. “As we enter peak rental season, rents in Southern California have seen the same evolution as the rest of the country, although the average rent in the region is generally higher than the national average rent of $1,442.”
The rent gains will also continue to fuel investment activity throughout Southern California, even in markets with occasional decreases in rent, like Santa Monica. “Multifamily investors have shown interest in the SoCal residential market and continue to do so despite rent fluctuations,” says Ciuntu. “Southern California is a region that practically advertises for itself—a warm climate, business prospects, entertainment possibilities, and a booming job market are just a few of the perks of living in one of the most beautiful regions in the U.S. Residential real estate investors understand that, which is why cities like Los Angeles remain in the top markets for real estate investment.”