Oversupply reduces rent

A report released today forecasts that rents for Orange County apartments will continue to fall, by 2.5%, during 2010.

The USC Casden Real Estate Economics Forecast anticipates that an oversupply of new apartments in Anaheim and Irvine could keep rents down. Meanwhile, the exceptionally high cost of homes here keeps the apartment vacancy rate low, the report finds.

By comparison, rents in San Diego are forecast to increase by 0.7% in 2010, thanks in part to an improving jobs picture there. Los Angeles rents are expected to decrease at a rate slightly faster than Orange County’s, while Riverside and San Bernardino counties will likely stay flat, the report’s authors say.

“Overall, Southern California will not see sustained increases in rents until the greater economic health of the region improves,” said Tracey Seslen, co-author of the report, in a statement.

She also said the health of the apartment market is shaped in part by the “shadow” market of rental homes and condos — as people lease out their homes to meet mortgage payments, the supply of apartments essentially increases. This has led to increased vacancy in some regions.

“Housing is more affordable across the region, but low consumer confidence is keeping many first-time buyers on the fence and move-up buyers that lost equity are staying put,” said Richard K. Green, another co-author. “That opens the door for an increase in rents.”