APARTMENT RENTS ON THE RISE HOUSING SLUMP PART OF REASON.

Byline: GREGORY J. WILCOX

Staff Writer

Apartment rents jumped across Southern California last year and vacancy rates continued tightening, in part because of the housing market slump, according to a report that will be released today by the Lusk Center for Real Estate at USC.

Apartment occupancy rates now top 97 percent in nearly all submarkets of Los Angeles County, including the San Fernando Valley, the report said.

Meanwhile, rents in the county increased an annual 5.6 percent in 2006, the study said. And steady gains in the overall economy continue to improve the fundamentals for the region's apartment market.

"Stricter lending standards following the subprime mortgage meltdown are causing many potential homebuyers, who now face a larger down payment and higher monthly payments, to find renting more affordable," said Delores Conway, director of the University of Southern California's Casden Forecast.

It is also harder to qualify for a mortgage now because lending standards have been tightened.

Conway expects occupancy rates to average 96 percent across the five- county region this year. When a market's occupancy rate is higher than 95 percent, it is at capacity, she added.

The report also showed that:

Valley rents jumped 5.9 percent last year and now average $1,385 a month -- an average of one-, two- and three-bedroom units. This follows a 9 percent increase in 2005. The Valley's vacancy rate averaged 2.3 percent.

In the Santa Clarita Valley, the rent increased 2.4 percent last year to average $1,386 and the vacancy rate was 4.5 percent.

In the Antelope Valley, the rent increased 4.3 percent to $1,144 and the vacancy rate was 3.9 percent.

Even though sales have fallen since the start of the 2005 fourth quarter, the median home price around the region has stayed flat, although it reached a record in L.A. County last month.

"As economic activity expands across the region, steady job growth and high home prices bode well for landlords," Conway said. "Strong investor interest and favorable long-term interest rates should help sustain sales activity of apartment buildings in all markets even as more units are being built."

The West Los Angeles, Hollywood and Valley submarkets will continue to shine, with more than 6,000 units under construction.

Daniel Blake, director of the economic research center at California State University, Northridge, said the housing boom in the first half of this decade tipped things in favor of homeowners.

For example, according to the 2000 census, 50.1 percent of households in the Valley owned homes while 49.9 percent rented. A recalculation of those numbers last year found 52 percent owned and 48 percent rented.

"I attribute it to the way the federal reserve system fought the 2001 recession -- with low interest rates, and the main impact was on mortgage rates and it made a first-time mortgage super cheap," Blake said.

People at the high-end of the rent scale found that it didn't cost that much more to move to a house or condominium.

"When housing prices started soaring, rents were going up less than 5 percent," he said. "Then we saw rents take off when housing prices stopped going up."

greg.wilcox(at)dailynews.com

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