The Rental Market in San Diego: What's Happening with Prices and Availability?
The rental market in San Diego has seen its fair share of ups and downs over the past few years. Like many major cities across the country, rents in America's Finest City skyrocketed during the COVID-19 pandemic. But after almost two years of rapid increases, it looks like San Diego rents may finally be starting to stabilize.
According to recent data from ApartmentList.com, rents in San Diego increased by just 0.6% in June 2022. While that represents a slight uptick, it's far lower than the double-digit percentage increases seen throughout much of 2020 and 2021. Additionally, year-over-year rents are actually down 0.1% in the city.
This leveling off comes after a prolonged period of dramatic jumps in San Diego rental rates. At the pandemic's outset in March 2020, the median rent for a one-bedroom apartment in San Diego was $1,585. By June 2022, it had soared 29.4% to $2,012. The story is similar for two-bedrooms, with the median rent climbing from $2,031 to $2,594 over the same timeframe - an increase of 27.8%.
Several factors contributed to these large rises in San Diego rental prices:
- COVID-related shutdowns and layoffs left many unable to afford purchasing homes. This increased demand for apartments.
- Work-from-home policies enabled renters from more expensive cities like San Francisco to relocate to San Diego.
- Fewer people were willing to take on roommates during the pandemic, so there was a spike in demand for one-bedroom units.
- Some renters upgraded to larger units to have at-home office space.
- Out-of-town investors bought up properties to turn into short-term rentals, reducing housing inventory.
Fortunately for renters, it appears the market has stabilized from its red-hot pandemic peak. But that doesn't necessarily mean rents will start to fall dramatically in San Diego anytime soon. Here's a look at why experts believe rents may remain fairly flat.
Will Rent Prices Start Dropping in San Diego?
While San Diego rents aren't skyrocketing like they were in previous years, most experts doubt they will fall significantly in the near future. Here are some of the key factors that will prevent major drops:
- Job growth and population increases will sustain demand. San Diego's sunny climate and coastal location make it a magnet for new residents. The city's burgeoning tech and life sciences sector also continues to add high-paying jobs.
- Builders are still playing catch-up on new construction after COVID. Labor and materials shortages have delayed many projects. Until inventory rises considerably, landlords will likely keep rents stable.
- Investors are still buying properties at a rapid pace, believing San Diego real estate remains undervalued compared to other CA cities. This limits supply and prevents large price cuts.
- Some relaxed COVID policies like remote work are here to stay, enabling transplants to keep moving in. Vacancy rates remain low at 4.7% in San Diego.
- Landlords are wary of reducing rents too much after large hikes, fearing pushback when re-raising them. Small cuts of 1-3% seem more likely than dramatic ones.
While prices probably won't decline significantly, there are some signs rents could remain flat or creep up very minimally over the next 6-12 months:
- National inflation is still very high at 8.6%, squeezing renters' budgets and preventing large rent hikes.
- If job losses mount or the economy slips into recession, tenant demand may fade slightly and limit landlords' pricing power.
- Rising mortgage rates lower buying power, which may force some prospective homebuyers to keep renting, boosting vacancy rates a bit.
- Some pandemic trends like remote work and living with family may partially reverse, reducing housing demand.
- If the Fed keeps raising interest rates, investor buying may cool and inventory could rise over time.
- More new apartment projects are finally being completed after delays, expanding supply.
Overall, San Diego rents are unlikely to return to the era of 20%+ annual jumps given slowing demand and rising supply. But due to the city's continuing desirability and solid economic and demographic outlook, major decreases also seem unlikely. Expect a continued leveling off but with perhaps tiny dips or insignificant gains through 2023.
Tips for Renting an Apartment in San Diego
If you're looking to rent an apartment in San Diego during this time of stabilizing prices, what should you do to find a suitable rental home at a reasonable price? Follow these tips to rent smartly:
Know the different neighborhoods. With its sprawling geography, San Diego offers very different environments depending on where you live. Research amenities, culture, commute times, and safety for neighborhoods that fit your lifestyle. For example, downtown offers an urban vibe while La Jolla provides coastal living.
Check pricing history. Look at sites like Zillow to understand how much rents have risen in your desired area over the past 1-2 years. This will give you an idea of what's considered a fair rate. Areas that saw huge pandemic spikes may now be overpriced.
Monitor new listings daily. With demand still outpacing supply, good deals go fast. Check sites like Zillow, Apartments.com and Craigslist frequently to be the first to inquire and tour. Signing a lease within a week of posting is common.
Consider off-season timing. San Diego's peak rental season is May to September when families with kids seek homes before school starts. Aim to sign a winter lease when prices are softer and availability is higher.
Look beyond downtown. Many neighborhoods just outside downtown like Hillcrest and North Park offer urban living for much lower rents. Expand your search radius for better deals.
Seek private landlords. Big complexes are convenient but pricier. Renting a unit in a smaller building or someone's second property may offer more flexibility on rate. Scour local ads.
Offer good qualifications. Landlords want reassurance you'll pay reliably. Come prepared with good credit, clean rental history, proof of income, and references.
Negotiate strategically. Don't ask for huge cuts, but politely inquire about slightly lowering the asking rate. Offer to sign a longer lease or pay a few months up front for a discount.
Move fast if you find a gem. In slower seasons, you may have a week or two to decide. But in summer, be ready to apply in 24 hours or risk losing out. Have funds for the deposit and paperwork ready.
With proper preparation and realistic expectations around pricing, finding an apartment in San Diego is very doable. The market is starting to thaw from the feverishness of 2020/2021. But the city's enduring popularity and housing undersupply means stellar deals are unlikely. Focus your search on value, not just price. With its gorgeous climate and beaches, San Diego will remain in demand for renters for years to come.
If you are investor looking to rent out your property, reach out to Harland Property Management. We provide full-service property management to handle all aspects from tenant screening to maintenance. Our detailed knowledge of the local market ensures you receive maximum return on investment.
And if you're seeking your perfect San Diego rental home, we represent dozens of properties throughout the metro area. Contact us today to learn more about our available rentals, application process, and how we can help you find your ideal accommodation. With personalized service and the ability to match great tenants with quality properties, Harland Property Management aims to make renting in San Diego as stress-free as possible.