The slumping housing market, which has fallen 30 percent since its
peak in late 2005, should provide a boost to San Diego’s traditionally
tight rental market, according to Marketpointe Realty Advisors.
The
local market research firm said 71 new home and condo conversion
projects totaling 4,930 units have been taken off the market since
2006, including 471 units last quarter.
Typically … many return
to rentals, said Russ Valone, president of Marketpointe Realty. “What
that is doing is increasing the supply in the rental market, which is
good because vacancy rates … have been declining.”
Off-market projects also represent opportunities for bargain hunting among distressed properties.
“When
we look at distressed properties throughout Southern California, most
are detached houses,” Valone said. “In San Diego, there are few
detached projects. Most of the stuff … is in condo conversions or
townhome projects. A lot of those have gone back to the rental pool or
entered for the first time.”
Yet, vacancies have behaved unpredictably, even for San Diego.
According
to Marketpointe’s most recent survey of complexes with 25 units or
more, the vacancy rate fell to 2.25 percent Aug. 31 from 3.63 percent
Feb. 29.
The drop in homeownership resulting from foreclosures and
short sales has led to an increase of renters. Now, as owners convert
properties back to rentals, Valone said he expects market equilibrium.
“We were starting to see strains in rental with decline vacancies,
so off-market projects are helping the rental market,” he said. “They
say 5 percent vacancy is standard. We haven’t seen a 5 percent market
in a while. We fluctuate between 2 and 4 percent.”
There were
more than 468,000 rentals out of 1.1 million housing units, said
Michelle Slingerland, a spokeswoman for the San Diego Apartment
Association.
“Traditionally, we’ve had below 5 percent vacancy rates,” she said. “It’s traditionally a tight market.”
The association conducts its own vacancy survey twice a year based on member responses and a sampling of non-members.
Last spring, vacancy rates countywide were 4.8 percent, an increase from the 3.4 percent in the fall of 2007, she said.
The fall 2008 survey will released Dec. 1.
“It will be interesting to see if we will now see decline in
vacancies,” she said. “It’s been difficult to predict. With these homes
going into foreclosure, one could theorize they will be back on the
rental market, which could offer an increase in supply and more
choices.”
She added, “It’s a real shadow market. Some suspect owners may be
moving out of town or maybe some foreclosed homes were never occupied.”
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