Los Angeles Rents Still Influenced by Apartment Foreclosures

by Donald Hanz on Foreclosures

Rental rates in Los Angeles are still influenced by apartment foreclosures. Although foreclosure activity involving apartments has slowed down in the first months of the year, the record number of apartments foreclosed in 2008 and 2009 are still putting a downward pressure on rents.

Based on a study by the University of Southern California Lusk Center for Real Estate, apartment rents in Los Angeles County are expected to drop by an average of 3.5 percent this year. Compared to the other counties studied, including Orange, San Diego and the Inland Empire, the biggest decline was projected to occur in Los Angeles County.

Last year, as Los Angeles foreclosures continued to shoot up to record levels, the average rent for apartments dropped by nearly 10 percent to $1,654, down from the $1,836 average rent in 2008. In downtown Los Angeles, the average rent dropped last year to $1,488, a decrease of 5.8 percent from the 2008 average rent.

However, there are a lot of Los Angeles landlords who believe that rental rates will rise particularly for downtown properties. They believe that apartment foreclosures downtown have been absorbed by the market, as shown in the rising occupancy rates of downtown apartment buildings.

They cite the success of the Brick Lofts, Emil Brown Lofts and Factory Place Arts in renting out their units. Units at Emil Brown have been leased for $1,200 to $3,000, about the same as the $1,250 to $2,800 rental rates in other buildings.

Also, landlords now are standing firm on their higher rates. Over the past two years, they were giving substantial discounts to cope with bank owned property listing prices. Now, they no longer lower their rates despite requests from prospective renters. In addition, the decline in foreclosures in California in March and April also helped stabilize rental rates.

While landlords in inner-city areas affected by apartment foreclosures are still expected to struggle from low rents this year, downtown landlords believe rental rates will appreciate significantly this year.