[IMGCAP(2)]The implications of the forecast for investors aremixed, too, since rents are a chief factor in determining pricingand a major component of the net operating income that investorsrely on to calculate cap rates. As with many if not mostdiscussions regarding investment properties these days, the outlookfor the apartment market is tied to the employment outlook.

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As Tracey Seslen, co-author of this year's Casden MultifamilyMarket Forecast puts it, "The future health of the SouthernCalifornia multifamily market continues to be shaped by jobs,housing prices, the shadow market of rental homes and condos, andnew construction." Seslen says that, overall, Southern Californiawill not enjoy sustained increases in rents until the greatereconomic health of the region improves.

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On the other hand, rents in San Diego may increase slightly whenjobs return―and since housing is still too costly forrenters to become buyers in San Diego, landlords should be able toachieve the increases. The reason that San Diego will outperformthe other SoCal markets in rental and vacancy rates is a steadystream of defense contracts and strong growth in the biotechindustry that buoy the region's economy, the study explains.

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Seslen's co-author, Richard K. Green, notes that while housingprices have dropped precipitously due to the surging rate offoreclosures in the Inland Empire region of Riverside and SanBernardino counties, the low-cost homes are being snapped up byall-cash buyers, not renters, who often lack 20% down payments andthe income needed to qualify for a mortgage. "Housing is moreaffordable across the region, but low consumer confidence iskeeping many first-time buyers on the fence and move-up buyers thatlost equity are staying put. That opens the door for an increase inrents," Green explains.

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Los Angeles County is another matter: The unemployment ratehovers at 12.3% and plenty of inventory stands empty, thanks to newluxury condos being turned into rentals. In Orange County, averagerents will decline at a slower pace as new projects in Anaheim andIrvine will continue to attract renters priced out of the housingmarket, according to the forecast.

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The Casden Multifamily Market Forecast analyzes new buildingpermits, leasing activity and employment data using informationfrom MP/F YieldStar, Hanley Wood and other sources. The forecastprovides a county-by-county outlook for Los Angeles and Orangecounties, the Inland Empire and San Diego County.

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