As reported, two quite different economic points of view exist on the San Diego rental market rates. A USC Lusk Center for Real Estate’s first-time survey of the San Diego residential rental rates indicates rental rates are stable and will rise during the next two years. In contrast, a local San Diego economist finds in his survey that rents are lowering, but at a lesser pace than in most large rental communities in California.
While most of Southern California saw rents go down and occupancies drop, San Diego appears to be holding fairly steady thanks to the local military bases, higher educational institutions, and the still strong biotech, health care, and telecom industries. Vacancies are up slightly, but that nemesis of the mathematical abstraction of the average (read ‘median’) rent actually rose a little to $1,340 in San Diego.
San Diego is forecast to likely continue to outperform in this sector, despite tenants leaving apartments to take advantage of low-priced REOs and households doubling up to share expenses.
first tuesday take: The huge issue for both these economists is the phantom rentals which have not yet hit the market and will do so during 2009 through 2012. Extensive numbers of new condominiums must be occupied, and they will not likely be sold to buyer-occupants anytime soon. Then there are the REO properties which are finally being acknowledged as the dark clouds looming over the sales and rental markets ready to dump a huge quantity of vacant property onto the landscape, which will also not sell as well to buyer-occupants as they will to investors who will have to put them up for rent.
No part of the state will skirt the depth and breadth of this recession unless its population is very heavily burdened with an aging and retired population, like Santa Barbara, or heavily subsidized by the military, such as Coronado and Twenty-Nine Palms. Jobs will be the issue for every county and community, and San Diego has the job-loss range of California’s higher density areas, but with a lesser percentage of loss than most others.
The counties of San Diego, Orange, and the combined counties of Riverside and San Bernardino all have roughly the same base of employed population at about 1.5 million current jobholders. Job losses during the past twelve months ranged from only a 2.9% drop in San Diego (and San Jose), to a 4.9% drop in Orange (and Sacramento) and a 6.4% drop in Riverside/San Bernardino. These statistics mean that 40,000 jobs lost during the past 12 months were in San Diego, 72,000 were in Orange, and 80,000 were in Riverside/San Bernardino.
If the Lusk Center is right about San Diego’s rental market has hit bottom and is now on the rebound, this will ripple and influence neighboring counties and eventually the entire state. We suspect that the rental market declines in LA, Orange County, and Riverside will produce the weightier influence for the next four-year period, which would make the Lusk Center appear to be the state’s greatest optimist.
Re: “County’s rental market ‘loosening up a little’” from The San Diego Union-Tribune