San Diego Softening Rents

[Alex U.]

https://www.biggerpockets.com/blog/2024-rental-market-foreca...

Since July of 2023, rents seemed to have topped for the time being.  More units coming online, and more people sharing spaces due to a lack of affordability.  We have had to cut rent for new units 8% from the previous lease.  This could be seasonality.  We saw rents go up 50% between Mid 2020 - 2023, at some points rents will revert to a long-term mean graph.

[Dan H.]

Before the crazy recent decade long RE appreciation and associated rent growth, rents would rise in spring and through summer and flatten out in fall and winter. 

Rentometer latest YOY shows 8% rent growth for San Diego.  To have flattish fall or even declines in winter is historically is historically not as unusual as it currently seems with the last decade (excluding 2020). 

I suspect that our rent YOY will continue to be positive for at least another few years due to 1) housing shortage 2) the cost of purchase being highest since 1980s. 3) geographically constrained 4) minimal infill available 5) costs of adding small unit counts is incredibly high. If a small ADU costs $200k+, it will not result in low rent units. 6) desirability of living in San Diego. Our climate will always make this a highly desirable place to live.

I will have a unit coming available in early January.  I typically find a qualified tenant in the first open house.   I dislike trying to get a tenant in winter but current tenant is terminating lease early (lease was through May).  I expect this tenant to be more challenging than usual due to it being January (only month I consider worse is Dec).  Time will tell how hard it will be to find a qualified tenant in January.