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APARTMENTS SCARCE RENTAL PRICES RISING WHILE VACANCY RATE REMAINS BELOW 5%.

Byline: Gregory J. Wilcox Staff Writer

RESEDA - Sometimes people can get lucky despite market conditions - for example, find a suitable apartment when vacancy rates are ultra-slim.

That's what happened to Reseda resident Nancy Mirashrahi last week as she looked for an apartment to live in for four months while work is being done on her Reseda town home.

It took her only two days to find a temporary residence. Nevertheless, it was an eye-opening experience.

``The rents are too high,'' she said, accurately taking the market's pulse while filling out an application at Tarzana Terraces in Reseda for a two-bedroom apartment that was renting for more than $1,000 a month.

These days the San Fernando Valley's apartment market is being squeezed by the same economic forces acting on the owner-occupied housing market.

Supplies are tight, vacancy rates are low, rents are rising, demand is high, and not many apartments are being built.

Don't expect this to change in the near future, either.

Like owner-occupied housing, most of the new apartment developments are on the outer fringes of Los Angeles in communities like Santa Clarita, Palmdale and Lancaster, analysts said.

``The market is full,'' said Brian Abernathy, a senior market analyst who specializes in the Los Angeles area for Marcus & Millichap, a real estate services company. ``Apparently there is not enough supply to meet demand.''

That's not the best situation for someone looking for rental housing. Owners and managers aren't complaining, though.

Robert Hart is the senior vice president of Santa Monica-based Kennedy Wilson International, a big real estate company that buys, rehabilitates and sells apartment buildings across Los Angeles.

The company owns about 140 units in Canoga Park, and Hart is happy with the investment.

``We're constantly full,'' he said, noting that vacancy rates for most owners are less than 5 percent.

Since the third quarter of 2000, the occupancy rate in Los Angeles County has slipped from 97.9 percent to 95.9 percent at the end of this year's second quarter, according to Realfacts, a Novato-based research organization and data base publisher that specializes in the multifamily market.

The company surveys apartment complexes of 100 or more units and does not include senior, student or subsidized housing. It does include the working class, however.

Occupancy rates began to slip after the terrorists attacks last Sept. 11 and, along with rents, retreated slightly during the fourth quarter of last year and first three months of 2002, analysts said.

The second quarter saw the occupancy rate tighten to almost 96 percent.

And that two percentage-points dip in the occupancy rate since 2000 came at a time when the owner-occupied housing market caught fire and many renters discovered they could own something for about their same monthly cash outlay.

Historically low interest rates and liberal credit policies, such as loans requiring no down payment, contributed, too.

But even though the vacancy rate slipped, rents increased over the same period.

For example, the Realfacts survey found that in the third quarter of 2000, rents in the county averaged $1.135 per square foot but had increased to $1.248 a square foot at the end of last quarter.

The average rent for a two-bedroom, two-bath unit was $1.44 per square foot, or $1,209 a month for an 840-square-foot apartment. That's an increase of $125 over seven quarters.

Gerald P. Cox, Realfacts director of marketing, notes that the rental market in the Los Angeles area did not get as overheated as the San Francisco Bay Area's did.

He thinks an occupancy rate around 95 percent suggests a balanced market that is equitable both for renters and apartment building owners.

Even so, driving around the Valley it's possible to find signs advertising vacancies and move-in deals in the same neighborhoods where signs on some buildings report no vacancies.

Waiting lists are common, too, and some rental deals are closed with new tenants before the old tenants move out.

Marcus & Millichap's Los Angeles survey points out that this is likely to be an owners' market going forward, which pretty much is the way its been for years.

The company analysts predict that:

--Job growth will recover in Los Angeles County during the next 12 months, with local employers adding nearly 77,000 jobs.

--The difference between average rent and mortgage payments has increased to $700 per month and has now reduced the opportunity for renters to become homeowners. That's because housing prices are not at record levels.

--Vacancies will remain unchanged over the next year.

--Lack of inventory and low interest rates are driving values in the investment market. The average price per unit will rise by 5 percent in 2002.

The company expects 3,000 to 3,500 units of both rental and owner-occupied housing to come on line over the next couple of years, still far below what is needed to meet demand.

For example, in 1989 permits were issued for 48,000 new units in the county, but by last year the comparable number had fallen to 18,000.

And when new apartments are built, they are at the high end of the rental scale because of land and construction costs.

The only substantial complex - the first phase is 125 units - that will open in the next 12 months in the Valley is Legacy Partners Bella Vista at Warner Center at the northeast corner of Oxnard Street and De Soto Avenue in Woodland Hills.

It is billed as a premium luxury complex that will feature Internet hookups, two big pools, cabanas, a 7,000-square-foot clubhouse, sauna and steam room.

This won't fall into the affordable-housing category.

Meanwhile, Marcus & Millichap analysts note that about 2,000 new multifamily units will be built over the next 12 months between the Santa Clarita and Antelope valleys.

Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., has been noticing lots of out-of-state license plates on the freeway during rush hour these days.

This suggests that the car owners are not on vacation and is a sure sign that demand for housing won't be easing.

So look for vacancies to remain in the 4 percent range and rents to continue climbing.

``It's going to continue to be a tight market, and it's going to be tough to find attractive apartments at reasonable rental rates,'' he said.

CAPTION(S):

2 photos, chart

Photo:

(1 -- color) Even in a tight market, with rents rising, apartment hunters can find some advertised specials. Analysts expect vacancy rates to remain below 5 percent in the area.

(2) Avi Edery, left, leasing agent at Tarzana Terraces in Reseda, holds an application form while he talks with an apartment hunter, Ensiyeh Mirashrafi, in the lobby.

Charlotte Schmid-Maybach/Staff Photographer

Chart:

TIGHT MARKET
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Date:Aug 11, 2002
Words:1124
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