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Southern California Home Price Surge Outpaces Rent Growth

Homeownership Is a Negligible Risk to Apartment Demand

Home Price Surge Outpaces Rent Growth

By Jesse Gundersheim CoStar Analytics

March 6, 2024 | 11:49 AM

Southern California led U.S. home price growth in 2023, according to the Case-Shiller Index. An 8.3% increase in the Los Angeles - Orange County area was only topped in the 20-City composite index by an 8.8% rise in San Diego, while the U.S. national index increased by 5.5%. Home prices in Los Angeles are now 4.3 times higher than in 2000, vastly outpacing a less than twofold increase in apartment rents over the same period. Coupled with higher interest rates, rapid home price escalation in Southern California has opened a wide gap in the financial burdens between owning and renting.

Considering rents for Class A, 3-bedroom apartments in Orange County run approximately $4,500 per month and cost over $5,000 in Los Angeles County on average, residents theoretically capped at those expense limits are only afforded slim pickings in the purchase market. At prevailing 7.4% 30-year fixed loan rates available to high credit buyers, an equal monthly payment in Orange County supports purchasing a home or condo priced up to $720,000, generously assuming the buyer is paying a 20% down payment of over $140,000.

Within that price range, fewer than 50 houses, townhouses and condos/co-ops with at least 3 bedrooms are listed for sale across Orange County on The majority of those offer smaller footprints compared to the 1,400 square foot average found among 3-bedroom apartments, which typically come with a bevy of high-end amenities, not to mention upkeep.

Removing bedroom minimums, fewer than 300 homes are listed for sale in Orange County between $500,000 and $750,000, and another 160 listings fall below $500,000. More commonly, homes sell for well over $1 million in the area. Among the nearly 2,200 for-sale listings on, excluding manufactured homes, 64% are above $1 million.

Home Price Surge Outpaces Rent Growth

Apartment demand is not highly correlated with trends in homeownership historically, and as home prices soar even higher in Southern California, homeownership represents a nominal threat to apartment investors. Even high-income renters of large luxury apartments in the area are seldom able to purchase a million-dollar home.

Nevertheless, those who gain the financial ability to enter homeownership will continue to chase the American Dream. Young couples progressing through life will seek additional space and safe neighborhoods to raise families. Moreover, buyers will continue to pay higher monthly costs to reap the financial rewards of rising home prices, enticed by the massive equity gains that continue to flow to Southern California homeowners.


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