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.