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Apartment Rents Fall as Demand Tapers in San Diego

Drop in Asking Rents Hits Third Straight Month


By Joshua Ohl

CoStar Analytics

December 1, 2022 | 10:47 AM


Asking rents continued to fall in the San Diego apartment market in November, marking

three months of decline in a row. This is the longest stretch of rents falling on a month over-

month basis in San Diego in more than eight years.


During November, average rents fell 0.7%, to around $2,325 per month. That followed a

cumulative 1.5% drop in rents in September and October. Average rents are now level

with market rates at the end of May.


Even after the 2.2% dip over the past three months, rents are still up 5.9% year over year.

Among California markets with more than 20,000 market-rate units, San Diego is the

top performer. And among major markets in the United States with more than 100,000

units, San Diego’s rents have grown at a better pace than any located west of the

Mississippi River over the past 12 months.


Annual rent growth is still comfortably ahead of the market's long-term average of 3.5%,

but it’s coming off a peak of 14% seen earlier this year. And in real terms, when

accounting for inflation, rents are falling on an annualized basis.


Nearly every area of San Diego has seen rents fall over the past three months, but none

more so than in the University Town Center and north shore cities areas, where rents

have dropped 5.4% and 4.2%, respectively. National City, conversely, has seen rents rise

nearly 1% since September, and average monthly market rents remain San Diego’s

lowest.


Rents in the luxury segment, which average nearly $3,200 per month, have fallen 3.8%

during the past three months. Rents in mid-tier properties have fallen by 2.1%, while

workforce housing rents are up a modest 0.5%.


That performance has come as demand, measured by net absorption which tracks the

change in occupancy over time, fell during the third quarter. That was the first time in

the past decade that quarterly demand was negative.

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