San Diego County Apartment Rentals are Slow, Steady

Wednesday, December 10, 2008
Emmett Pierce
The San Diego Union Tribune

With slight drops in both vacancies and monthly rates, the local rental market is sluggish but stable, the San Diego County Apartment Association reported in its twice-yearly survey of landlords and apartment managers.

The average rent for all unit types countywide was $1,188, a slight decrease from the $1,201 reported in the spring survey, but a year-over-year increase of 1.7 percent.

The countywide vacancy rate on all unit types was 3.6 percent, a decrease of 1.2 percent from the spring survey and an increase of 0.2 percent year over year.

"Last spring we saw an increase in vacancies due to an increase in the supply of foreclosed homes being rented," said Robert Pinnegar, the association's executive director. "Now it appears that those units are being absorbed and vacancy rates are returning to where they were a year ago."

The report echoed findings released in October by the RealFacts research firm. That survey, which focused on large complexes of 100 or more units, found that rental and vacancy rates were essentially flat during the third quarter.

The apartment association's survey, which is scheduled for release today, concluded that the declining cost of residential real estate is not prompting a significant shift of renters into homeownership. In October, the median home price in the county was $323,500, a 37 percent decline from $517,500, the peak of the recent housing boom in November 2005.

Kelly Cunningham, an economist at the San Diego Institute for Policy Research, said the credit crunch is preventing many renters from taking advantage of low prices on foreclosure homes. That's good news for landlords, but demand for rentals is being undercut by a number of other factors.

The ability of landlords and renters to connect online at Web sites such as Craigslist has created what Pinnegar calls a shadow rental market. The Internet has made it easier for people to rent out condominiums, investment homes and spare rooms, creating more competition for apartment complexes.

In addition, the declining economy has led more people to take in roommates who otherwise might rent their own units. Alan Nevin, director of economic research at San Diego-based MarketPointe Realty Advisors, said the county no longer has a strong influx of new residents competing for rentals.

"It relates to the decline in the job market," Nevin said. "It is just a function of not enough new blood. That is what keeps the apartment market going - new folks coming into the county."

In addition to studying rates and vacancies, the association looked at which types of rental units are most in demand. One-bedroom units reported the lowest vacancies in the recent survey, followed by two-bedroom units, units with three bedrooms or more and studio units.

Survey results were mathematically weighted to take into account the dominance of one-and two-bedroom units in the marketplace. Of the 37,000 units surveyed, 88 percent were one-or two-bedroom rentals.

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