Name: Forecast: San Diego rents to drop by 10%
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Forecast: San Diego rents to drop by 10%

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Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement A well-known real estate tracker is predicting a 10 percent drop in rents in San Diego County by the end of the year because of the economic fallout of COVID-19. CoStar says the average rent now, around $1,840 a month, should drop to roughly $1,664 a month by the last three months of 2020. Its analysis predicts a sluggish reopening to the economy that will keep many tenants jobless and unable to pay, and landlords having to cut rates to keep renters or attract new ones.It would be a historic decline considering rents hardly changed during the Great Recession and San Diego is often considered one of the most resilient multifamily markets in the nation. AdvertisementThe real estate tracker continues to modify its forecast as new data comes out, changing it four times since the middle of March, so it could alter it based on how reopening goes. But it is taking a more pessimistic view of the economy ramping up quickly and is using a model that takes into account unemployment, vacancy rates and other factors.Joshua Ohl, CoStar managing analyst, said the extra $600 people are getting on unemployment from the federal CARES Act runs out at the end of July and there doesn’t seem to be more stimulus checks coming. “In my judgment, I think that once the stimulus checks and the $600 a week sweeteners fall off, people are just not going to be able to make rent payments,” he said. Additionally, Ohl said it seemed unlikely the economy could fully reopen if schools don’t open. He said it will be increasingly difficult for workers with children to handle the stress of a job and helping teach their kids.CoStar uses data from Oxford Economics, a global forecasting firm, for its proprietary formula in predicting rents. Ohl said Oxford is predicting job losses of around 235,000 in the second quarter, which would far exceed the nearly 100,000 unemployment claims for San Diego County in mid-April by state labor officials. He said the formula also considers the downward trend seen in the last few months. CoStar data says the average rent was about $1,855 a month in the fourth quarter, so it has dropped about $15 — not a huge amount but notable for the typically hot San Diego market. The roughly 10 percent rent drop CoStar is predicting from now until the final quarter of 2020 would be without precedent. During the worst of the Great Recession, rent dropped about 3 percent from the third quarter 2008 to the third quarter 2010. Even with increased benefits, many renters may have fallen through the cracks. Mariam Goff, 50, of Chula Vista, said she lost her job of 17 years in security at the Manchester Grand Hyatt on March 13 and has struggled to receive unemployment. Admittedly, she was confused by the application process, and the state Employment Development Department ended up asking for more information, but the delay has meant a struggle to pay for her most basic needs. She has received an Electronic Benefit Transfer, or EBT, card to help pay for groceries for herself and her 10-year-old daughter and 12-year-old son. She had enough money to pay for rent at the start of the pandemic, but ended up borrowing money from friends to pay for this month at her $1,200 a month, two-bedroom South Bay apartment.Goff said she wants to cut her Internet bill but doesn’t know what to do because her children now have online classes.“I just say, ‘Oh my goodness,’” she said Thursday.Goff rents an apartment that is less expensive than most of San Diego County’s market but Ohl said much of CoStar’s analysis looks at losses among high-end apartments that have popped up all over the county, especially downtown and University Town Center, in the last few years.The vacancy rate in University Town Center, where a high percentage of new apartments are located, has gone from 6.16 percent in the fourth quarter 2019 to 6.5 percent now. Rent in UTC has fallen from $2,535 a month to $2,402 in the same time period, but calculating the actual rent can get tricky because of the increase in concessions. San Diego County’s newest apartments, largely around East Village and UTC, are offering deals to entice renters to sign leases during the pandemic. The 368-room Shift apartments in East Village is offering eight weeks free and $1,000 as part of its “virtual tour and lease special”; Park 12, downtown San Diego’s largest apartment with 718 units next to Petco Park, is giving eight weeks free on some apartments and an interior design package; and, arguably, the region’s most high-end apartment complex is offering one month free for some units. The 300-unit Palisade UTC, which , has an average rent of $4,072 a month, said CoStar. In addition to the one-month free deal, average rents at the complex have been reduced by roughly $28 a month since opening. Not everyone sees the rental market changing that much. Darcy Miramontes, a San Diego managing director at real estate firm JLL, predicted rents will return to normal after the quarantine. She said rents have largely been flat, similar to what CoStar said, in the past few months as landlords worked with renters to come up with payment plans and avoid increases. Even with rent strikes and other unrest over the financial crisis during COVID-19, Miramontes said most landlords and renters have been able to weather the storm with payment plans and other ways to address hardships instead of letting a major price crash happen. Still, the national picture for rents seems to show a notable slowdown that might be hard to ignore as going away quickly. A Zillow report showed rent prices had slowed nationally in April more than in the last five years. It still showed rent going up, 2.9 percent annually, but that was down from 3.4 percent the previous month. The report showed rent increases slowing in 33 out of 35 of the largest U.S. metros, with Columbus and Cleveland being exceptions. It showed San Diego metro rents increasing by 2.8 percent in a year, much lower than Phoenix at 7 percent and Seattle at 4.7 percent, but in line with other California markets. Annual rent growth in San Jose was 1.3 percent and Los Angeles was 2.3 percent. Perhaps helping landlords, several lawmakers have proposed forms of rent relief tied to the COVID-19 recovery. Los Angeles city council president Nury Martinez proposed a $100 million Wednesday that would help tenants that earn less than 80 percent of Los Angeles County’s area median income who can demonstrate they were financially or economically affected by the virus. The city subsidy would be paid directly to landlords. A similar proposal is expected to be discussed Tuesday at the San Diego City Council. The desire by council members for a similar program was a topic of discussion last week as the council an eviction moratorium. Get U-T Business in your inbox on Mondays Get ready for your week with the week’s top business stories from San Diego and California, in your inbox Monday mornings. You may occasionally receive promotional content from the San Diego Union-Tribune. Show Comments Load More Advertisement Advertisement AdvertisementAdvertisementAdvertisement

Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement A well-known real estate tracker is predicting a 10 percent drop in rents in San Diego County by the end of the year because of the economic fallout of COVID-19. CoStar says the average rent now, around $1,840 a month, should drop to roughly $1,664 a month by the last three months of 2020. Its analysis predicts a sluggish reopening to the economy that will keep many tenants jobless and unable to pay, and landlords having to cut rates to keep renters or attract new ones.It would be a historic decline considering...

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Phillip Molnar

PhillipMolnar

The San Diego Union-Tribune, the region's leading news source since 1868. Follow our journalists, too: http://j.mp/UTstaff

Forecast: San Diego rents to drop by 10%

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