■ Matt McPherson / Columnist
Throughout California and the nation, rents continue to rise, causing many renters to consider purchasing a home with a mortgage rate that is the same or lower than what they pay in rent. The monthly rent report from Apartment List, which tracks rent growth, median prices, and market trends, says the average 2-bedroom condo renter in Los Angeles must make more than $100,000 a year to make ends meet.
In Riverside, the rents appear to be plateauing, however they have increased 4 percent since last year at this time. Riverside and the surrounding areas have remained more affordable than comparable cities nationwide. The national average of $1,150 for a two-bedroom apartment is just below Riverside’s median for the same property at $1,280. Throughout the Inland Empire the average was $1,278 a month, which is up 5.4 percent, or $59 a month. Rent increases are occurring all across the metro areas and into the surrounding suburban sprawls. “Of the largest 10 cities that we have data for in the Riverside metro, all of them have seen prices rise,” according to the report.
The Orange County Register reports: “Rents in the region have gone up on a year-over-year basis for at least 22 consecutive quarters, Reis figures show. It could be worse. Asking rents averaged $3,471 a month in the New York metropolitan area. Apartment rents averaged $2,946 a month in San Francisco, $2,496 a month in the Silicon Valley and $2,134 in the East Bay.”
This gradual rise in rents is converting many tenants into first-time home buyers. With mortgage rates hovering in the 4 percent range, it’s still a logical time to apply for a home loan. According to the LA Times, one-third of the state’s renters spend more than half their income on housing costs. The California Association of Realtors say, “Even though rent is high in California, buying, for many, can often be more affordable than renting. More than one million households earn more than the minimum qualifying income, yet they continue to rent.”
Locally here in Hemet, rents are surging much faster than in metropolitan areas, but still remain much more affordable than renting in the big city. According to Andrew Woo, the data scientist for Apartment Search, “Hemet one-bedrooms rent for $930 while two-bedrooms rent for $1,170. Over the past month, Hemet rents decreased by 0.3 percent but they increased 7.0 percent over the past year.”
Notice of rental increases have become common with the housing market so hot and very few existing vacancies persisting throughout the valley, state and nation. A tide of millennials frustrated with throwing their money away on a lease are opting to buy at an impressive rate. Factors such as student loans, lack of income, and cost of living pose a hurdle though when calculating the debt-to-income ratio.
In addition, investor/landlords have seen the writing on the wall and are making all cash offers on properties they plan to rent out to take advantage of the low inventory and huge demand for rentals. This is frustrating many first-time home buyers who are FHA-approved, but cannot compete with all cash offers, which don’t require much of the red tape such as appraisals, inspections and repairs. These investors are willing to pay at or above list price and can usually close in fewer than 20 days, making their offers much more appealing.
Locally here in the San Jacinto Valley, dozens of condo, townhome and rental properties are currently being developed to cater to the high demand for rental properties. Smaller one and two bedroom apartments with less maintenance are becoming more desirable as contemporary buyers and renters are turning away from the traditional house with a yard and white picket fence.
Matt McPherson is a licensed real estate agent with Coldwell Banker Associated Brokers, BRE # 01362837. Reach him at 951-315-7914 or McPhtown@aol.com.