[quote=gzz]The strongest rental growth will be where there is limited supply and growing demand.
The supply of single family homes with nice sized back yards for kids/dogs in central San Diego is going down each year as more and more are infilled with apartments or second units.
The fastest demand growth IMO will be from retiring upper-middle class boomers. The features that may be most popular for them may be 3 or fewer bedrooms, space for gardening/dogs/grandchildren, walk-able/bikeable neighborhood, single story house and a lot without deep canyons or drops.
For older couples, single retirees, and those without the budget to have guests stay over, condos with a lot of amenities should also do well. Within Central SD and mature North County areas, this is also the fastest growing supply as new lux complexes get built and old dumpy apartment complexes get converted to lux condos.
I think working couples with kids are probably averse to having less than 2 full baths. But retired people with only the occasional guest will probably be more willing to have 1 or 1.5 baths.
I think the coastal areas with plenty of smaller SFH on their own lots, from OB to Carlsbad, is likely the sweet spot for long-term appreciation of both rents and prices. IB and OC seem a tad too remote and downscale to attract boomers with pensions and equity from bigger paid-off residences.[/quote]This is a pretty good analysis of the available residential SFR inventory going forward in well-established areas of CA coastal counties … with a few caveats.
First of all, 1.5 baths is a design mistake of primarily builders of the ’80’s thru the ’90’s. Primarily used in small units/PUDs (townhouse-type) of 2 floors, the 1-1/2 bath design leaves no tub/shower on one floor, which is a huge inconvenience, especially if a bdrm exists on that floor. Any units being remodeled or converted (or built after about 2000) include at least a shower on the 2nd bath (in a 2-bath unit), making the unit have 1-3/4 bath … a much more usable unit for a small family or roommates. Even a downsizing boomer doesn’t want 1.5 baths! A “powder room” or 1/2 bath is fine for a home which already has two full baths.
Yes, boomers DO prefer one story homes. Many of them (perhaps more than 70% in SD County) already own a one-story SFR as a residence. But if they do happen to have stairs, they’re not going to sell and re-buy a residence in CA unless they can take their old assessment with them pursuant to Props 60/90. There are limited counties participating in this “statutory scheme,” besides SD County:
Boomers are not going to suddenly start paying $350 to $600 month in HOA dues at the age of ~60+ for a condo in a “Luxe” complex if they haven’t paid HOA dues in the past 20+ years … or ever in their lives. H@ll, effing NO! And that’s the vast majority in CA!
Even one collecting pension(s) (which are generally fixed with low or no increases every year) does not want to add to their monthly expenses when that money could be much better deployed to other uses such as home improvement, travel and assisting grandchildren with college.
It’s much, much cheaper to hire a gardener (even if one has a large lot which they can’t maintain by themselves anymore) than it is to be suddenly subject to HOA dues (and possible MR on a *newer* “Luxe” condo complex) PLUS any impromptu special assessments … especially for a deferred maintenance period which commenced long before the new buyer even took ownership of their unit! Witness all those beautifully-landscaped large two story “period homes” on Coronado which are occupied by just 1-2 people. And do not believe for one minute that they will all suddenly go on the market after the last homeowner dies!
Both of the above reasons (PLUS the effect of Props 13, 58 and 193 on CA’s books) represents 85-90% of the reason for the dearth of SFR listings on decent-sized lots in well-established areas of CA coastal counties in recent years. The closer to the the coast, the more pronounced the scarcity is and will be into perpetuity unless two or more of the above laws are eventually repealed. The proliferation of SFR zoning to multi-family/comm’l zoning is only occurring in 10-15% of urban micro-markets in CA coastal counties (ex: in SD, University Heights and parts of North Park). It is NOT occurring in every well-established urban neighborhood in coastal counties, nor will it . . . ever.
North Park (SD) began to be upzoned by City as early as 1988. It had a majority of residents who were renters in swaths of it, hence they had no voice when City voted to upzone those sections. This is NOT the case with the vast majority of aging urban neighborhoods in CA coastal counties!
In sum, a boomer would rather have their old house with stairs (and keep their <$1000 annual tax bill) than sell and move into a condo in the same county or move out of county (unless they can make Prop 90 work out for themselves) or out of state. To a great extent, the existence of stairs is the lesser of all evils.
Don't count on SFR inventory in well-established sections of urban coastal counties of CA getting any better for decades ... or ever. With the existing laws on CA's books, there is no reason whatsoever to believe this could or would happen.
