Yardi Matrix: Price of Paradise Jumps in the OC
A rising population and healthy economy create demand, while supply growth is tepid, which has pushed rents high and vacancies low.
Orange County rent evolution, click to enlarge
Sunny Orange County’s apartment market has a lot going for it. A rising population and healthy economy create demand, while supply growth is tepid, which has pushed rents high and vacancies low. However, that has also bumped rents up to levels that are unaffordable for a large portion of the population.
Employment rose by 3 percent through July, sustained by the local building boom. Orange County also boasts the highest concentration of science, technology, engineering and math (STEM) jobs in the region, providing a good business climate for fast-growing companies such as SpaceX, Microsemi, Edwards Lifesciences, Masimo Corp. and Universal Electronics. Tourism is also robust, supporting job growth and attracting new projects.
Orange County ranks as one of the most expensive markets in the nation, with the median home price at $614,000 and average monthly rents at nearly $1,900. Consequently, many young families and working adults with moderate incomes are being priced out of the market, which lacks adequate workforce housing. And while upcoming supply may be significant, luxury apartments make up the bulk of new construction. Property values continue to rise, and transaction activity hit $1.3 billion through September. The aggressive pace of investment creates a low cap rate environment, attracting buyers who accept lower yields in exchange for stability and capital appreciation.
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