San Diego rents expected to rise this year

Reports: Demand outruns supply, so units will cost more and be harder to land

 

By Lily Leung and Roger Showley

May 13, 2012

Rents are expected to rise and competition for apartments may stiffen in San Diego County as more folks defer owning a home amid what appears to be a slowly improving job market.

Rising demand from young workers — also known as Gen Y’ers — fewer new units and tighter standards for mortgages also have pushed people into the rental market.

The result is a jump in rental rates. In March, the average rent in the county was $1,361, up 2.6 percent from a year ago, says real estate data company MarketPointe.

San Francisco finished 2011 with the highest rental-rate increase, at 4.7 percent, based on a separate report from commercial real estate company Cassidy-Turley, which has an office in San Diego. Washington, D.C., placed 10th with a 2.4 percent increase. San Diego County was not among the Top 10.

The county’s vacancy rate — the percentage of rental units that aren’t occupied — is at 4.43 percent, the lowest it’s been for a given March since 2008, when it was 3.63 percent. On a national level, San Diego has the sixth-lowest vacancy rate behind New York City, Minneapolis, Portland, Ore., San Jose and Seattle, the Cassidy-Turley report shows.

A big reason for the area’s lower-than-normal vacancy rate is lack of finished units.

MarketPointe estimates 2,650 units from nine projects are under construction in the county and most of them are expected to come online this year to help relieve demand, company spokesman Russ Valone said. Valone’s analysis shows the last time the county saw anywhere near that many units was in 2004, when 2,273 units were released into the market.

With such scarce inventory, demand is up and incentives either are no longer needed or are far “more modest now,” said Peter Dennehy, a vice president of John Burns Real Estate Consulting in San Diego. He added that rents in the county are expected to increase 3 percent to 5 percent a year this year because of those factors.

Fewer amenities, better price

 

Becky Parker, 24, was among the growing number of 20- and 30-somethings who moved back in with their parents after college to save up for their own pads.

Parker did that for a year, and last month, she moved into a two-bed, two-bath apartment in Solana Beach. She shares the apartment with a roommate for $1,695 a month, slightly lower than the average rent in that part of the county, according to MarketPointe figures.

“I looked at different places there and in La Jolla,” said Parker, a recent graduate of Loyola Marymount University in Los Angeles. “I chose this one because … it had the best price point.”

However, Parker had to sacrifice a few amenities to get the more affordable price, including an in-unit laundry machine and dryer and more up-to-date appliances.

‘We’re a little spoiled’

 

Daniel George, 30, and his wife went the opposite direction when it came to amenities and price. They spent the first quarter of the year looking for a newer rental in the county that was more decked out.

Last week, the couple from Los Angeles moved into a rental at Circa 37, what will be a 307-apartment community in Mission Valley that boasts a 10,000-square-foot recreation center, lounge, fitness center, spa and junior Olympic-size saltwater pool. They pay $2,200 a month.

“Before, we lived in a brand-new apartment when we were in L.A.,” said George, who relocated to San Diego for a tech job. “I guess you can say we’re a little spoiled. Where we were living, we had stainless steel appliances and hardwood floors. And a lot of the (other) places in (Mission Valley) didn’t have that.”

Homeownership rate low

 

What George and Parker, the Solana Beach renter, have in common is that neither are ready to be homeowners.

The U.S. Census Bureau reported the national homeownership rate was 65.4 percent in the first quarter, the lowest it’s been for a first quarter since 1997. The homeownership rate among those under 35 is 36.8 percent, the lowest it’s been in 17 years.

“We want to be free, to move depending where our jobs are,” said George, who signed a 15-month lease at Circa 37. He and his wife expect to stay there for two to three more lease terms.

Parker, the recent college graduate, says she expects to rent for at least five years.

“Buying a home,” she said, “I don’t know too much about it right now. Maybe once I settle down and everything.”


Source: UT San Diego