I use to think the same way. I had a first hand experience in such in college. 5% is usually considered healthy. One year, we hit something like .8% vacancy. LL’s were in hog heaven. Rents increased like %10+ a year, people were camping out on streets to try to get a place at any price, it was totally nuts.
Then the crash came. No one ever fully explained it well. Two new complexes that were really big opened up, a smaller one that had been being repaired reopened. The university didnt admit quite as many kids as expected. Everyone bought a house. I dont know, but I do know that when I left the apartment complex right next door was offering 9 month leases and vacancy was something like 10%. You heard that right, a 9 month lease. Since the students didnt stick around in the summer, you could rent a place Sept-June, and then move out, and have it waiting for you when you got back next Sept. Reported monthly rents didnt decrease much, but that is one hell of an incentive.

I dont see this happening in SD. Atleast not until we see some serious out migration. Perhaps the slumping economy will help, but vacancy seems really low right now. That isnt a good thing for rents.

I use to think the same way. I had a first hand experience in such in college. 5% is usually considered healthy. One year, we hit something like .8% vacancy. LL’s were in hog heaven. Rents increased like %10+ a year, people were camping out on streets to try to get a place at any price, it was totally nuts.
Then the crash came. No one ever fully explained it well. Two new complexes that were really big opened up, a smaller one that had been being repaired reopened. The university didnt admit quite as many kids as expected. Everyone bought a house. I dont know, but I do know that when I left the apartment complex right next door was offering 9 month leases and vacancy was something like 10%. You heard that right, a 9 month lease. Since the students didnt stick around in the summer, you could rent a place Sept-June, and then move out, and have it waiting for you when you got back next Sept. Reported monthly rents didnt decrease much, but that is one hell of an incentive.

I dont see this happening in SD. Atleast not until we see some serious out migration. Perhaps the slumping economy will help, but vacancy seems really low right now. That isnt a good thing for rents.

I use to think the same way. I had a first hand experience in such in college. 5% is usually considered healthy. One year, we hit something like .8% vacancy. LL’s were in hog heaven. Rents increased like %10+ a year, people were camping out on streets to try to get a place at any price, it was totally nuts.
Then the crash came. No one ever fully explained it well. Two new complexes that were really big opened up, a smaller one that had been being repaired reopened. The university didnt admit quite as many kids as expected. Everyone bought a house. I dont know, but I do know that when I left the apartment complex right next door was offering 9 month leases and vacancy was something like 10%. You heard that right, a 9 month lease. Since the students didnt stick around in the summer, you could rent a place Sept-June, and then move out, and have it waiting for you when you got back next Sept. Reported monthly rents didnt decrease much, but that is one hell of an incentive.

I dont see this happening in SD. Atleast not until we see some serious out migration. Perhaps the slumping economy will help, but vacancy seems really low right now. That isnt a good thing for rents.

less demand: There are more people moving out of San Diego than coming in.

In the near-term rents are likely to be flatten due to softness in the economy. So I agree with you on economic cycle effects.

But, while the net domestic migration has been negative (more people moving out than moving in), the population of San Diego has continued to increase.

Now that housing has busted the amount of new homes being built has declined drastically. (less supply)

Another factor that is ignored is the potential for net migration to turn positive. As those who moved out to Riverside County are foreclosed on and/or want to live closer to job centers because of the price of gas, you can expect at least some flow of people into San Diego from the bedroom/commute communities like Temecula. It will be attractive to rent a 1400 2-bedroom apartment 5-10 minutes from work and pay 150 bucks a month in gas, than to pay 1100 for a place in outlying community and pay 500 per month in gas. Not to mention added insurance and maintenance costs and time wasted in traffic.

My opinion is that rents will be soft along with the economy, but will track inflation.

less demand: There are more people moving out of San Diego than coming in.

In the near-term rents are likely to be flatten due to softness in the economy. So I agree with you on economic cycle effects.

But, while the net domestic migration has been negative (more people moving out than moving in), the population of San Diego has continued to increase.

Now that housing has busted the amount of new homes being built has declined drastically. (less supply)

Another factor that is ignored is the potential for net migration to turn positive. As those who moved out to Riverside County are foreclosed on and/or want to live closer to job centers because of the price of gas, you can expect at least some flow of people into San Diego from the bedroom/commute communities like Temecula. It will be attractive to rent a 1400 2-bedroom apartment 5-10 minutes from work and pay 150 bucks a month in gas, than to pay 1100 for a place in outlying community and pay 500 per month in gas. Not to mention added insurance and maintenance costs and time wasted in traffic.

My opinion is that rents will be soft along with the economy, but will track inflation.