Los Angeles Apartment Market (Same Story): Sales Volume Up - Rents Down - Vacancies Up - 5% Cap for Class A - 7% Cap for Class C Buildings

Apartment vacancies were 5.5% in the greater Los Angeles area during the 1st quarter of 2010, according to Lee & Associates (consistent with our analysis of 5.4% vacancies). The increase in vacancy rate is due to a lack of household formation -- young people don't move out of their parents' home, and others "double up" rather than getting their place.

According to the same report, Westside rents are down 20 - 25%, and rents in less prime areas are down 10%.

Cap rates in the Los Angeles area are in the 5% range in prime neighborhoods and in the 7% range for C-class buildings.

Although prices are down, Lee & Associates does not see the marketing softening as it did in the early 90's: there's too much demand on the buying side:

“This is Southern California real estate, and people want to live here. You’ll always have people coming here, and that will always drive rental demand, and you have a supply-constrained market—that will always exist here.” [Multihousing News Online]