2022 Southern CA Rental Market Forecast
Economists are hopeful about the recovery of the labor market in 2022, but what does that mean for the 2022 Southern CA Rental Market forecast? Specifically for the thousands of people who choose to rent instead of own?
Here’s what the experts are predicting for the 2022 Southern CA Rental Market:
The CA Population Question
One thing that usually contributes to a shift in the real estate market is a population change. After the economic struggles of 2021, California saw its first population decline since 1850. And while typically this would correlate to housing prices, economists don’t think it’ll make that much of a difference. According to a recent demographic study, “California loses more than twice as many people to domestic migration as it did before the pandemic. In Los Angeles County, 58,803 people moved away in the third quarter in 2021, while 24,882 moved into the county.”
The Rental Real Estate Market Is Still Hot
Despite the population decrease, home prices are still some of the highest in the country, and will directly correlate to rental rates. The average home price in October 2021 was $722,406, which was a 21% increase from the year before. Experts aren’t expecting home prices to stall as we enter 2022, and instead predict a rise by 5%. One thing real estate professionals are keeping an eye on is the limited supply of homes for sale, which could lead to slightly lower home prices.
California Braces For Higher Rental Prices
Higher home values mean higher rent prices, which has many California renters struggling to make ends meet, especially after such a rough economic year of shutdowns and failing businesses. This has a significant impact on the 2022 Southern CA Rental Market Forecast. Last year, rent prices went up more than 16%, and in some areas like Irvine, the number is even higher. Economists predict that less urban areas will be hit the hardest with higher rent prices. Areas like Palm Springs-Indio, West Riverside County, and Rancho Cucamonga-San Bernardino will see steep rental prices, ranging from 7-10% from previous years. This means a one-bedroom apartment in Palm Springs renting for $2,500 in 2021 is predicted to be as high as $2,685 in 2022.
But it’s not all bad news. The Los Angeles area expects to see a 1% drop in rental prices in 2022. This includes neighborhoods like Koreatown, Inglewood, Beverly Hills, and the Downtown Los Angeles area. Other areas in Los Angeles such as Burbanke and Palmdale will see slight rent increases, ranging from 3-4%.
Rental Property Inventory
Economics 101 teaches us then when demand is high and supply is low, prices increase. This is the current status of the California rental market: not enough available rental property and a surge of people needing rental property. This, paired with increasing interest rates, will keep the California real estate market buzzing. Economists predict that if measures are taken to counter the economic slowdown (say, another stimulus package, for example) the housing market may respond positively.
Other Things To Consider In The Home Rental Market
The pandemic has changed the way Californians have thought about everything, from how they work, how they educate their kids, and how they live. The last two years have changed the way people buy and rent homes as well. Owners want more space and privacy, renters don’t want roommates. The question is, will this mindset change if/when things return to the pre-pandemic way? And if this is the new normal, the need for space and social distancing will impact the way people look for housing.
In 2021 we saw people struggling to pay rents and eviction moratoriums in place to help people keep a roof over their heads while they lost their jobs and struggled with serious physical and mental health issues. Now, rental rates are soaring. The addition (or return) of 400,000 jobs helped many people get their heads above water and fill vacant apartments. But new jobs and higher paychecks don’t last forever, and eventually, inflation catches up. This could require landlords to raise rental rates, which in turn could force renters back into the roommate situation. Or eventually nudge renters to buy instead of rent. The verdict on how this will all play out remains unclear.
Next Steps If You Own Rental Property In The Temecula Murrieta Area
If you own property in Southern California and are wondering how you’re going to succeed in 2022, your first step is to get connected with Murrieta & Temecula’s leading property management company. The real estate industry is quickly changing. To increase profits and reduce turnover, you need to work with a team that knows the industry inside and out. Start here!