San Diego was second in the nation when it came to people looking for places to rent as 2021 came to a close, according to Yardi Matrix, a national apartment listing agency.
Only Eugene, Oregon, was more competitive than San Diego, according to Yardi.
“Despite the rising cost of living and housing, high taxes and the risk of natural disasters, San Diego is still a preferred alternative to other expensive West Coast metros, especially now that hybrid work is on the rise,” said Doug Ressler, Yardi Matrix business intelligence manager.
“Plus, as a typically strong job hub, San Diego is already on track to recovery thanks to funding coming through and federal emergency programs,” Ressler said.
The COVID-19 pandemic had less of an impact on the apartment market in San Diego than in other coastal cities, according to Ressler.
Vacancies were almost non-existent, with an occupancy rate running at 97.6% for stabilized apartment complexes.
Trouble is, the construction of new apartment projects has fallen far behind demand, fueling intense competition for apartments that are available.
“This year (2021), it took 26 days for an apartment to be filled, with 29 people competing for a rental in America’s Finest City, twice as many as the national benchmark,” Ressler said. “There’s not enough to meet the demand but nevertheless it is a surge from what it was in 2020.”
Going into 2022, Ressler predicted that there would be a resurgence of apartment construction in San Diego.
Although final figures for 2021 aren’t in yet, Yardi was projecting that 3,381 new apartments were added to the overall inventory in 2021, with 3,156 expected to be added in 2022, 3,396 in 2023, 3,635 in 2024, and 4,403 in 2025.
Rental Rates Continue to Rise
In a rental market so tight, rents were on the rise.
“Rent growth was substantial across the map, with some of the most sought-after submarkets posting double-digit increases on a year-over-year basis, including Del Mar, Coronado and University (City),” Ressler said.
University City had the strongest rent growth, with Yardi reporting that monthly rents jumped nearly 26% and the median rent at $2,898 and 97% of apartments occupied.
At the other end, Fallbrook had the lowest rent growth of nearly 4.6%, a median monthly rent of $1,461, and an occupancy rate of 99%, according to Yardi.
New apartment construction should soften but not stop rent growth, Ressler said.
“You’ve also got some other factors – the cost of material, the availability of labor, and the supply chain is trying to adjust to the next normal,” Ressler said. “That will play out but what we’re hearing is that the supply chain won’t stabilize until the 2024 time frame. And then you’ve got the ugly thing of inflation and things like that and the cost of money and what that’s going to do.”
Citing a University of California study, Yardi reported that “contrary to popular belief that California has seen a veritable pandemic-induced ‘exodus,’ recent research revealed that residents haven’t really been fleeing the Golden State. Instead, they moved within the state, seeking better quality of life and less expensive housing.”
In listing the top 50 rental markets in the U.S., four were in California on what Yardi called its “red hot” list, including San Diego.