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8/22/17
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The multifamily housing market in Orange County remained very strong in the second quarter of 2017, maintaining high occupancy while the average asking rent continued to rise. According to NAI Capital’s just-released Multifamily Market Outlook, the vacancy rate registered 4.1%, down 30 basis points from the first quarter of 2017. The vacancy rate compared to last year at this time remains the same. The market is demonstrating that newly constructed apartment units over the past year are being absorbed.
The average asking rent for multifamily units rose this quarter, continuing a trend that has seen growth for 28 consecutive quarters. Apartment renters in Orange County this quarter paid an average of $1,832 per unit, 1.4% more than the average this time last year. Population and employment growth continue to be the primary drivers of demand for multifamily housing, pushing occupancy rates and asking rents to historic heights.
Currently, there are 10,704 multifamily units under construction, with nearly a third being built in Irvine alone. Residential permits are expected to grow by 4.0% in 2017 over last year to reach 12,500, according to the Los Angeles Economic Development Corporation. However, Orange County has one of the lowest affordability rates in Southern California. California Association of Realtors estimates that as of June 2017, only 21% of households are able to afford to purchase the median home priced at $788,000.
According to Steve Heri, Senior Vice President, CCIM, “Demand for Multifamily will continue both on the “for rent” side as well as the “for sale” side. Population growth in Orange County and low unemployment have continued to increase demand and lower vacancy rates. The abundance of Capital from both equity and debt are aggressively pursuing multifamily product, this demand will continue.”
“Apartment vacancies will remain low in 2017 due to home values being out of reach for many potential buyers (Millennials). There will be a further disconnect between wages and affordability to buy homes in Southern California and this will help continue to push rents for apartments for the foreseeable future,” added Vice President Steve Gim.
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