Los Angeles County has had a rental shortfall of 25,000 units per year for the past four years, and that same dynamic of strong demand and insufficient new supply is expected to continue, according to a University of Southern California real estate economics forecast.
Economics forecasters and real estate experts are meeting at a conference in Los Angeles today to discuss the forecast and issues relating to the region’s multifamily housing sector. The conference, “Cracking the Code: Reshaping Urban L.A.,” is hosted by the USC Lusk Center for Real Estate, which conducts the Casden Real Estate Economics Forecast for the Los Angeles region. This forecast projects real estate trends in Los Angeles, Orange, Ventura, Riverside and San Bernardino counties.
Raphael Bostic, director for the Casden Real Estate Economics Forecast, said 2004 is expected to be a status quo year for the multifamily housing market in the southern California area, with predatory lending and construction insurance among the hot topics for the region’s multifamily sector.
Low mortgage rates have allowed a growing number of Southern California renters to become homeowners.
Even so, the home home ownership rate in the Los Angeles area is about 40 percent, compared with the national rate of about 70 percent, Bostic said. And the continuing influx of immigrants to the region is expected to keep the rental market strong.
“The low interest rate environment has definitely paid its dividends here,” he said. “We still have a substantial number of people who are looking to be active in the rental market.
“Land is very expensive. One of the big problems for (the region) is the steep supply and demand imbalance. There just hasn’t been an adequate amount of building to match the demand for units, even with low (rates) making ownership attractive,” he added.
In Los Angeles County, the multifamily housing market is marked by rising rents and high occupancy rates, which have mostly remained above 95 percent since 2000, according to Casden’s “Southern California Multi-Family Report 2004.” Rental rates jumped 10 percent in 2003 and nearly 30 percent since 2000. Monthly rental rates in Los Angeles County now approach $1,300 per month on average, the report states, and larger units are in particular demand.
“Rents per square foot have grown nearly twice as fast for three-bedroom units than for other types of units” since 2000, the report states.
Consumer spending, particularly in the housing sector, has helped to keep the economy rolling, the report also states, though it’s uncertain whether “an onslaught of new investment and employment is around the corner” as the pace of new job creation may not be enough to keep the economy growing.
The conference today will also focus on insurance and liability problems for real estate developers and include an investment perspective on Southern California’s apartment market. Participants also will discuss opportunities for adaptive reuse and conversion of industrial and commercial buildings in downtown areas, and the best and worst locations for real estate development and investment in the Los Angeles region.
A national economic forecast released this month by the University of California, Los Angeles, predicts new-home sales “will do well merely to hold 2003 levels, which means no further gains in housing starts or residential construction.” Low mortgage rates served to relieve a pent-up demand among first-time home buyers who had previously been locked out of the market, the UCLA Anderson Forecast states, but, “home sales and starts should trend lower over the next few years.”
The Anderson Forecast concludes the economy will improve this year, but not by leaps and bounds.
“Barring an explosion in exports, aggregate U.S. growth will do well to remain modest,” the forecasters predicted.
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