It’s no secret that home ownership in the U.S. has reached record lows these days, as an increasing number of people prefer renting their homes instead of buying a house for them. According to the U.S. Commerce Department, the homeownership rate in the U.S. is currently just above 63%, a figure last seen in 1965.
Using simple supply and demand economics, we can easily identify the reason behind this extraordinary investment performance of rental properties: Demand. According to Zumper, some L.A. neighborhoods, such as Westwood and Santa Monica, showed rental growth of more than 15% just in 2015.
So, where’s the catch?
Now, while this is good news for potential investors, we cannot say the same for potential renters. According to Freddie Mac, 2016 will again be a very good year for apartment performance, with Los Angeles leading the way in rental growth, fuelled by a thriving economy. As Marcus & Millichap 2016 Los Angeles Multifamily Market Report indicates, rents will continue to rise this year as well, reaching a modest 3.7% increase as compared to 2015. However, this is just an average figure, which means that certain L.A. areas will outperform it by far. For example, places such as Westwood, Beverly Hills, Sherman Oaks, North Hollywood, Pasadena, Glendale, and others, are expected to show rent increases over 8% as compared to the previous year.
In addition, lower than average vacancy rates are expected in the greater L.A. area, which will make finding an apartment in Los Angeles even more challenging.
Act Fast, Act Wisely
So if you’re looking for apartments for rent in Los Angeles, we could only advise you two things: Act Fast and Act Wisely. Act Fast is a pretty straightforward term, as rental rates are at record highs and are expected to rise even higher. According to Zillow, residential rents in Los Angeles increased by a cumulative percentage of 80% during the period from 2012 to 2015. Just to illustrate it better for you, this means that if a family could afford to pay for a specific residential unit in 2012, they will have to pay almost double that amount, in order to rent the same unit today.
But what does Act Wisely refer to?
As you may (or may not) already know, renting an apartment in the U.S. comes together with high associated costs and risks. Ok, we’re not saying that private property rights are as unprotected as they are in some third world, communist banana republic, but you still may have to pay a large amount of your hard earned cash on application fees. This, in turn, is no guarantee that you will be granted an apartment lease, especially in this market, which will lead to a rejected application. Now a rejected application will lead to a lower credit score which in turn will increase the chances of another rejected application and more wasted fees and so on.