Average rent in San Diego County hit a record high of $1,875 last month, continuing more than six years of rising rents in a tight housing market.
Rent has increased 7.59 percent in a year, said MarketPointe Realty Advisors, which has tracked the San Diego market since 1988. While that is down from an 8.4 percent increase at the same time last year, the latest jump still outpaced home price increases and expected income growth.
"The biggest upward pressure we’ve seen in rent has been over the last two years,” said Russ Valone, CEO of MarketPointe. “It has been significant increases.”
A slowdown in new apartment construction, dropping considerably during the recession, is one factor driving up rents.
As construction has slowed, demand has increased. But when developers do build, they are constructing luxury units that command high rents and push up the average. An increasing number of townhouse rentals have also raised the average, MarketPointe said.
So far this year, 861 new apartments have come on the market, an increase from 756 total last year. Compare that to the early 2000s when builders were delivering more than 2,000 apartments a year.
Evan Morris, a real estate agent who manages a portfolio of 200 rental properties across San Diego, said he had just one unit available Thursday.
The single-family home in Talmadge, for $2,295 a month, went on the market Wednesday and had two potential renters trying to get in by Thursday.
“Vacancy has practically been zero since 2012,” he said.
Competition for apartments in San Diego County led to a 2.73 percent vacancy rate in September, up from 2.25 percent in March.
The average vacancy rate has been 3.15 percent since 2000. It hit a record low of 0.51 percent in 1998 and a high of 7.86 in 1988. During the recession, the highest vacancy rate was 5.26 percent in March 2009.
Where are all the studios?
The price of studios had gone up 11.4 percent in a year as of September, the most of any unit size.
So, why aren’t builders coming out with tons of studios?
First off, the data can be a bit deceiving. Valone said new one-bedroom apartments are getting smaller, more efficient and taking the place of what might have been studios. The average size of a one-bedroom in the county is now 705 square-feet, down from roughly 800 square-feet from 2010 to 2016.
Second, builders prefer two-bedrooms for a lot of reasons, including demand. For couples, they enjoy the bigger units because it can mean a second bedroom for a child, an office for working from home or a guest room.
Also, he said two-bedroom apartments tend to fill up with friends saving money by living together when the economy goes south.
“It gives the builder or owner a hedge against a down market,” Valone said.
Average rent for a studio was $1,529 a month in September, a large jump from $1,372 in March, but still noticeably cheaper than most apartments.
Average rent for a one bedroom was $1,640; two-bedroom, $1,972; three-bedroom, $2,399; and a four-bedroom was $3,069 a month.
MarketPointe’s report includes 131,600 apartments, and covers mostly complexes that have 25 or more units. So, smaller units attached to houses or a room in a house are not covered.
What you need to know about location and old apartments
East County had the cheapest rent, coming in at an average $1,523 a month in September, with 17,254 apartments and a 2.21 percent vacancy rate.
The San Diego central market — made up of downtown, Mission Beach, Ocean Beach, North Park — had the most places to live with 193 apartments. Average rent there was $2,033 a month with a 2.96 percent vacancy rate.
Highway 78 corridor had an average monthly rent of $1,664 for 26,329 apartments and a 2.27 percent vacancy rate. The Interstate 15 corridor had an average monthly rent of $1,927 for 13,862 apartments and a 3.77 percent vacancy rate. South County had an average monthly rent of $1,643 for 19,104 apartments and a 2.59 percent vacancy rate.
The most expensive place to rent was North County coastal, including Del Mar, Encinitas, Del Mar and Carlsbad. Average rent was $2,390 a month for 19,625 apartments and a 2.79 percent vacancy rate.
Any apartments built before 2000 averaged $1,724 a month in September. If it opened this year, the average price was $703 more a month.
The cheapest average rent was $1,409 a month for a studio built before 2000 with an average of 486-square-feet. The most expensive was $3,186 a month for a three-bedroom apartment built in 2016 at an average 1,437-square-feet.
If it seems like more people are taking on a roommate and not just to save costs. It might be the only thing available. Two-bedroom apartments make up 52.6 percent of all apartments in San Diego County, the most of any type. One-bedrooms make up 35.7 percent of rooms; three-bedrooms, 7.8 percent; studios, 3.5 percent; and four-bedrooms, less than 1 percent.
The lowest vacancy rate in the county — 1.4 percent — is for apartments less than $1,200 a month. The highest — 28.3 percent — was for units costing between $2,100 to $2,299 a month.
How do we compare?
While MarketPointe's report only focused on San Diego County, other studies indicate it is not the most expensive place in the nation.
Real estate website Zumper, using more than 1 million active listings, said median rent for a two-bedroom apartment in the San Diego region in October was $2,300 a month (higher than the average $1,972 used by MarketPointe).
San Diego had the ninth-highest rent for a two-bedroom in Zumper's study, behind Los Angeles ($3,200), San Francisco ($4,500), Washington, D.C. ($3,180), Oakland ($2,580), San Jose ($2,760) and others.
Alan Nevin, industry analyst at Xpera Group, said many West Coast cities are at a disadvantage because of lack of land zoned for housing.
He said because fees for high-end units, called Class A, are always the same as slightly cheaper housing, called Class B, a builder will always go for more expensive apartments.
“We’re missing the B apartments,” Nevin said. “We can’t afford to build them. The numbers just don’t work.”