SAN DIEGO COUNTY – Apartment rents dropped in January in a trend that’s expected to continue, but rental rates for single-family homes shot up, with San Diego recording the biggest increase in the nation.
Among major U.S. metro areas, San Diego in November posted the largest year-over-year increase in monthly rents for single-family homes in the nation at 5.6%, according to CoreLogic, a global property research company.
The November figures were the latest CoreLogic had, but Molly Boesel, principal economist for CoreLogic, said that she doesn’t expect a significant shift.
When it comes to single-family rentals, “San Diego rents, until recently, have been kind of lagging the rest of the country, but now, they’re much higher.”
High home purchase prices in San Diego have made renting single-family homes attractive.
“When things get pretty expensive, then potential buyers are priced out of areas for buying single family, rentals are the next best thing,” Boesel said.
The median monthly rent for attached and detached single-family homes was hovering slightly below $4,000.
The higher rents for single-family homes have piqued the interest of investors, with about 36% of the homes sold in the third quarter of 2023 bought by investors, Boesel said.
Throughout much of 2023, single-family home sales to investors have accounted for more than 30% of sales, according to CoreLogic.
“Investors are attracted to areas that have a strong rental market.
They see a strong rental market, rents are going up, they want to come in and make money off of that,” Boesel said.
Declining Apartment Rents
The story for apartment rentals has been far different, with monthly rents dropping 1.3% from December to January and 2.4% from January 2023 to January 2024, according to Apartment List, a company that tracks the apartment market.
The median rent for a one-bedroom apartment in San Diego County in January was $1,938 and $2,429 for a two-bedroom apartment.
Nationally, month rents in January were 1.7% lower year-over-year and 1% lower year-over-year statewide, Apartment List reported.
It’s not unusual for rents to drop during and immediately after the holiday season, but throughout California, “it has been much more pronounced this year, across the board, particularly in San Diego,” said Rob Warnock, a researcher at Apartment List.
“This is definitely the most significant seasonal decline that we’ve seen in San Diego, at least as long as we’ve been tracking the data,” Warnock said. “We’ve been seeing a lot of multifamily construction projects coming to fruition with even more expected to come online in the next 12 to 18 months. That’s going to help push prices down, or at the very least, slow down any increase.”
Throughout 2024, the story in the apartment rental market will likely be similar to 2023.
“Rent growth should be low or negative,” Warnock said. “Year-over-year, we’re expecting rents to end 2024 at or below where they were in 2023.” Long term, Warnock said that he expects rents to bounce back up.