SD Realtor, what do you think would be the driver for rental rates to go up? Personally, I don’t see anything that will push up rental rates in the near future. My feeling from watching the rental market and the real estate market is that the most that the average family/person can afford in San Diego for housing is $2000-$2500/month or thereabouts. That is, the average income in San Diego can only support that level of housing payment each month.
The reason house prices have increased so much is due to all of these exotic mortgage products that allow people to take on bigger and bigger mortgages while still making monthly payments that the borrower can afford. These mortgage products allowed a whole new class of buyer to enter the market who otherwise would have been priced out. The extra demand pushed up the prices of real estate, but it wasn’t organic demand. Rather, it was a sort of “manufactured” demand that occurred when lower income folks were granted $600,000 mortgages that only required $2,000 monthly paymnets.
So I don’t really see anything that is going to drive up rents. As long as average income in San Diego remains relatively stagnant like it has been, people will only be able to afford $2000-$2500 monthly payments. Once a rental reaches that monthly price, it will begin to top out, with only exceptional properties renting for more than that. However, I could see places that rent for less than $2000 per month climbing to that price, but there seems to be a roadblock once that monthly rental price is reached, and that roadblock is the average income in San Diego.
