Los Angeles rents have decreased .8% in the first half of the year, according to a new report from Apartment List. Los Angeles rents have been stagnant since last year, so it is not surprising to see a nominal decrease due to the pandemic; however, this data includes the spring rental season, which usually helps to fuel annual rent growth. As a result, rent growth for the city could be down more significantly for 2020 with slower leasing activity expected in the second half of the year.
“The magnitude of the price drop may not feel shocking at first, but consider the deviation from the normal seasonal trend, in which rent prices generally rise a few percent every spring,” says Rob Warnock, a research associate at Apartment List, tells GlobeSt.com.
While the market as a whole declined, the submarkets within the Greater L.A. area showed more inconsistencies. For example, Long Beach rents were up for the year, while Glendale rents trends behind Los Angeles. “Admittedly, it’s a bit difficult to tease apart the fluctuations we see within a relatively small geographic area. One theory that we’re testing is that price drops are starting at the higher-end of the market, where demand is always first to dry up in a recession,” Warnock says. “There’s obviously a high concentration of expensive inventory in LA proper, and having grown up in Eagle Rock I know there’s a lot of new, expensive construction in Glendale as well. If demand is flowing from places like LA and Glendale to places like Long Beach, it could mean that the rent drops in Long Beach won’t materialize until later.”
While Los Angeles rents are decreasing, other West Coast markets are actually seeing rising rents through the pandemic. Phoenix is the most notable for its growth and resilience during the pandemic. “Along the same lines as above, there could be a lot of new demand directed to more affordable, growing Sun Belt cities like Phoenix,” says Warnock. “These lower-cost regions I expect will be the last to see dramatic rent price reductions, because they’re going to continue getting demand for longer, as the recession forces people to cut spending on housing.”
The .8% decrease in L.A. is likely only the beginning. Rents are expected to continue to drop more dramatically in the coming months and into 2021. “I expect this trend will continue for the foreseeable future. It’s broadly a response to general economic contraction across the country, and it doesn’t look like the economy will be bouncing back anytime soon,” says Warnock. “Plus renters today, for the first time in at least a decade, feel like they wield some bargaining power in the marketplace, because they sense landlords are extra-weary of vacancies right now. So I think renters as a whole will be stingier with their budgets, knowing that they might be more likely to find a good deal.”