The average rent in San Diego County hit a record $1,887 a month in March, increasing 8 percent in a year, said a new report released this week.
High-end apartment complexes downtown helped raise the rates substantially, especially those that opened in the last few months, according to data from San Diego-based MarketPointe Realty Advisors.
Rent has increased 20 percent since March 2015 when the average monthly rent was $1,563. However, there are some indications — such as an increased vacancy rate — that the pace of rent increases could be slowing.
In the last six months, average rent has increased less than 2 percent.
"What we noticed was some of the older stuff pushed rents a little too much," said Russ Valone, CEO of MarketPointe. "We saw a number of new projects where they rolled the rent back."
Vacancy rates ticked up to their highest point since 2014 in March — 4.08 percent — as the flood of high-end rentals hit the market. More than half of the vacant units in the county were asking more than $2,000 a month in rent.
It remains to be seen if the increased vacancy rate is a result of rent increases finally hitting an affordability wall or the data is skewed by so many new luxury downtown projects coming onto the market.
An 8 percent yearly increase is big and it seems some landlords might have pushed the envelope too far on what they charge for rent, Valone said Tuesday.
The MarketPointe report surveys 133,785 apartments throughout the county. Its data covers mostly complexes that have 25 or more units so not all rentals in the county end up in its reports.
Since 1988, the county has averaged a 3.46 percent vacancy rate for apartments, MarketPointe said. The rate dropped below 1 percent in 1999 and 2000, but increased during the Great Recession, peaking at 5.26 percent in March 2009.
If the seven new projects that opened in the last few months — almost all downtown — were removed from the data, the county's vacancy rate would be much lower, about 3.2 percent.
Also, older apartments don't command the same high rents. The average monthly rent for a unit that opened before 2000 was $1,730, as opposed to $2,721 for a unit that opened this year.
What you need to know about price ranges
The cheapest rental in March was a $1,402 a month studio built before 2000. The most expensive was a $3,772 a month three-bedroom apartment in a unit that opened this year.
Two-bedrooms remain the most prevalent type of apartment, making up 52.4 percent of units in San Diego County. Studios had the biggest yearly price increase, going up 3.1 percent in price.
Apartments costing less than $1,200 a month were the most in demand, having a vacancy rate of 2 percent. Units costing $2,200 to $2,299 a month were the least in demand, having a vacancy rate of 34.6 percent.
Where you live makes a difference, too. The most expensive place to rent is coastal North County with an average monthly rent of $2,261. Central San Diego, which includes downtown, Coronado and Pacific Beach, is an average $2,072 a month.
It is followed by the Interstate 15 corridor with an average $1,999 a month; Highway 78 corridor with an average $1,683 a month; South County with an average $1,651 a month; and East County with an average $1,561 a month.
More apartments coming
There are more than 2,000 new apartments expected to open this year, with most in downtown expecting to charge an average rent around $2,489 a month. That's an increase from the roughly 1,600 new apartments added over the previous two years.
The question for developers: Can the market sustain so many new apartments and still see rent gains similar to past years?
Mark Goldman, finance and real estate lecturer at San Diego State University, said lenders will be taking into account any decline of rental rates.
"Investors need to bet on values increasing," he said. "As rents start to taper off, values taper off, and investors would not be willing to pay as much for larger purchase prices."
San Diego still has cheaper rent than other markets, according to real estate website Zumper, which looked at one-bedroom apartments across the nation in March using more than 1 million active listings. It said the median for a one-bedroom was $1,800 in San Diego (higher than the average $1,679 MarketPointe had).
San Diego was the ninth most expensive market in March, Zumper said. The top markets were Boston, $2,300 a month; San Jose, $2,470 a month; New York, $2,900 a month; and San Francisco, $3,400 a month.