News

If you’re thinking that renting in Southern California is an affordable housing option, take a look at the latest report by Reis Inc., a New York firm specializing in data about real estate and economics. 

Averages

The report shows the following averages.

• Rents in Orange County averaged $1,753 a month during the first quarter of 2016, which is an increase of 3.7 percent or $63 over the year. That makes Orange County the 10th highest-rent city in the nation. At the top is New York at $3,474 monthly, an increase of 4.9 percent over the year.
• Rents in Los Angeles County averaged $1,630 per month, an increase of 5.5 percent or $85 from 2015. It ranked 12th among high-rent cities.
• According to the 2016 USC Casden Multifamily Forecast, the Orange County area with the highest rent was Newport Beach and Laguna Niguel at $1,962 a month. La Habra, Fullerton, and Yorba Linda showed an average monthly rent of $1,337.
• The LA County area with the highest average were the coastal communities and Beverly Hills at $1,648. The West San Gabriel Valley showed an average monthly rent of $1,315 while in Southeast Los Angeles, the average monthly rent was $1,175.
• For comparison, the average monthly rent in the US was $1,239. 

Supply and Demand

The reason behind these rising rents is, as always, supply and demand. Southern California’s booming economy is bringing more people into the area, even though there aren’t enough units to house them.

• Orange County showed an increase of 65,000 rental households, an increase of 17.6 percent from 2014 to 2015.
• In Los Angeles County, the gain in rental households was 161,000 or 9.9 percent.
• These rises are against a backdrop of 347,000 new rental households in Southern California, a 15 percent rise, from 2005 to 2014.
• Apartments are being built at a frenetic pace with 9,000 new rental units in Orange County last year. All of Southern California saw 38,000 new permits for multifamily buildings. Most these units are for luxury apartments.
• Still, this building pace could not keep up with demand. The vacancy rate in Orange County was 3.3 percent and in Los Angeles County, it was 3.2 percent. The vacancy rate for the US was 4.2 percent.

Rents aren’t going to get any cheaper in the coming years. The USC Casden Report predicts average monthly rates will climb by 9.4 percent from 2015 to 2018. 

Breaking Even

Given current market averages, Zillow can calculate break even horizons for various locations. These periods represent the number of years before buying makes better sense financially than renting.

• In Orange County, the breakeven horizon is 6.1 years with 7.9 years for Yorba Linda and 6.3 for Costa Mesa.
• In Los Angeles, it’s 4.8 years with 4 years for Norwalk and 12 years for Arcadia. 

Renting vs Buying

We won’t belabor the fact that renting throws money away month after month and year after year. And the amount you spend is only going to go up in Southern California. You’ll need to ask yourself if your salary increases are going to keep up with the projected rent rises.

Depending on the money you put down and the loan you get, your monthly payment for owning a home could equal or be lower than your current monthly rent. You’ll also save money on taxes, and be putting money into an appreciating asset. If you go for a fixed-rate loan, your housing expense can remain constant for the next 30 years.

Why not contact us today to see how your own home might make more financial sense for you? Brandywine Homes wants to be your California new home builder.