Apartment Rents Rise Every Month This Year

Apartment rents have continued to rise this year in Los Angeles. According to a report from Apartment List, apartment rents in the market have increased for five consecutive months, up 1.9% over the same period in 2017. The month-to-month increases, however, have been nominal and the momentum is slowing. In May, apartment rents have increased more than 1% but despite the slowed momentum, the average rent for a two-bedroom apartment is $1,750. By comparison, the national average for a two-bedroom apartment is $1,170.

“The drivers behind month-to-month changes can be a bit tough to pin down,” Chris Salviati, housing economist at Apartment List, tells GlobeSt.com. “I know that L.A. has a fair amount of new apartment inventory in the pipeline, but I’m not sure about the specific timing of when these new units are slated to come online. A spike in new inventory could be one potential culprit for the slight flattening in rent growth over the past couple months.”

Compared to rent growth in the two preceding years, rental rate growth has slowed dramatically. With only 1.9% growth in the first five months, Salviati says that is unlikely that rent growth will match the growth in 2017 and 2016. “Year-over-year growth for L.A. was 4.6% at this time last year, 4.5% at this time in 2016, and 5.5% at this time in 2015,” he says. “In order to reach these levels, year-over-year growth would need to increase between two times and three times. I don’t see any reason to expect such a sharp spike in rents in the coming months.”

In May, however, rental rate growth actually increased compared to the start of the year. In January and February, rental rate growth fell below 1%, but Salviati says that is normal for the time of year. “The increase in rents starting at the beginning of the year is attributable to seasonality in the rental market,” he says. “You’ll see that a similar trend is mirrored in the state- and national-level data.”

While rental rate growth is slowing down, the growth is not stopping or heading in the opposite direction. The market fundamentals, housing shortage and strong demand are likely to fuel positive rent growth through the end of the year. “I would expect rent growth to continue at a relatively modest pace for the remainder of this year,” says Salviati. “That said, forward-looking projections are always a bit tough.”