LOS ANGELES MULTIUNIT PROPERTY SNAPSHOT – MARCH 2010

LOS ANGELES MULTIUNIT PROPERTY SNAPSHOT – MARCH 2010
March 1, 2010 on 5:42 pm
By Jodi Summers
And the good news is – research is indicating that the Los Angeles employment market is expected to stabilize in the second half of 2010. Following a loss of 115,000 jobs in 2009, payrolls are forecast to expand by 0.3 percent this year, with the addition of 13,000 positions, observes the 2010 National Apartment Index Report by Marcus & Millichap. The lack of job growth is hurting demand in the multifamily market, confirms Reis Research. “It is only when labor markets stabilize and recover that we will see a ramp-up in household formation that represents the greatest driver for rental apartments,” observes Victor Calanog, Reis research director.

Investors obviously feel that the Los Angeles market is stabilizing. Comparing February 2008 to February 2010, the number of under contract multiunit properties in Los Angeles is up 148%, according to Clarus Market metrics.
In 2009, the national vacancy rate for apartment properties rose 1.3 percentage points to 8%, the highest level since t in 1980. Average asking rents in the sector dropped 2.9% to $1,026/unit last year. Rents fell or held flat in 69 of the 79 markets tracked by Reis.
For years, Los Angeles has had low, low, low vacancy rates, hovering between 2-3 percent – making it a very attractive market. Even with the recession making higher priced units on the West Side less desirable, vacancy rates are still hovering between 5-6%. The National Apartment Index Report notes that the lingering high unemployment will continue to pressure owners to lower rents. Asking rents are expected to fall to $1,335 per month in 2010, while effective rents will slip to $1,263 per month, respective declines of 2.8 percent and 3.6 percent annually.

Now that the economy is coming back, Los Angeles multiunts are still attractive. Between Feb-08 vs. Feb-10, the number of for sale properties is down 44% and the number of sold properties is up 53%.

According to Realpoint, 6.53% of securitized loans backed by multifamily properties are delinquent, which is the CMBS market’s second-highest delinquency rate behind the hotel sector’s 8.09% rate.
Investors realize the current value of the Los Angeles, and there is a trend of cash-rich buyers shifting money out of the stock market and buying multiunit property with the intent of holding it for future generations. This is why the average months supply of inventory is down -79.8%