So Cal Rents Keep Rising. . . A Positive Indicator?
Posted in Market Trends and Projections | By Blair Newman and Dave Emerson |
The U.S. Labor Statistic Bureau came out today with year-over-year rent stats for November, and we finally have an “up” arrow for So Cal Real Estate! Yup, rents for L.A., Orange, & Riverside Counties were up 6% from a year ago, which is the 4th biggest increase in the country.
What really makes our area stand out is that our rents have been going up for over a decade, while the other areas with big increases have only begun to see rent increases in the last few years.
Which brings us to the “So Cal is different” argument. In metropolitan L.A. & O.C. there’s very little buildable land, so rents–& home prices–are inherently higher than other areas. Especially as long as our local economy stays strong.
According to that school of thought, So Cal home prices, which are actually down 15 – 25% from the market’s peak, may have already corrected enough.
What we call “The Annual Real Estate Cycle” lends additional support to that idea. All things being equal, prices on homes entering escrow tend to go up from February through June, level off in the summer, and decline a little in the winter. (Those numbers show up in the statistics when the escrows close about 2 months later.) We’ve always said December is the best month to buy.
So a market turnaround this coming spring can’t be entirely ruled out for the built-out areas of So Cal. There are, however 3 or 4 reasons we haven’t ruled out continuing declines for 2008 and even into 2010. We’ll go into those in a day or two.
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