The Current State of the Multifamily Market in San Diego
As we head into Q4, the multifamily market in San Diego remains dynamic, influenced by new regulations, sales trends, and broader economic factors. To understand the current landscape, it’s important to examine regulations that impacted the San Diego markets and how this effects sales volume and market pricing.
New Regulations Impacting the Market
This year, San Diego has introduced several regulatory changes designed to tackle housing affordability and enhance tenant protections:
Rent Control Measures: Property owners have reported a reduction in capital expenditures (CapEx) for upgrades and maintenance, with some estimates indicating a drop of about 20-30% in spending compared to pre-rent control levels. This creates maintenance backlogs and delays repair times. (According to National Multifamily Housing Council and California Apartment Association research).
Zoning Changes: To alleviate the housing crisis, the city has expanded zoning allowances, particularly in transit-oriented areas. The San Diego City Council approved a new plan that encourages multifamily developments in zones traditionally reserved for single-family homes, aiming to add 10,000 new housing units by 2025.
Short-Term Rental Regulations: Stricter regulations on short-term rentals have been enforced, including a requirement for owners to obtain a permit to operate. This is expected to increase the availability of long-term rental units. According to city data, the number of legally permitted short-term rental units dropped from approximately 17,000 in 2022 to about 10,500 by mid-2024.
Sales Volume and Market Trends
Despite regulatory pressures, the multifamily sales volume in San Diego has remained strong. As of Q3 2024, the market recorded approximately $1.2 billion in transactions, which represents a 10% decrease compared to the same period in 2023, but still showcases robust investor interest in multifamily assets.
Key Metrics
Average Days on Market: The average days on market for multifamily properties have decreased to around 45 days, a significant improvement from the 60 days recorded in 2023.
Overall Price Trend: Many neighborhoods experienced a slight decrease or stabilization in average price per unit due to increased inventory and changing market dynamics influenced by new regulations.
Downtown (92101): Prices remained relatively steady, with minor fluctuations
North Park (92104): Saw a slight decrease, around 3.2%
Mission Valley (92108): Prices were stable
Chula Vista (91911): Increased demand led to a rise of approximately 8%
*If you would like an individualized report and valuation San Diego Apartment Brokerage can do this more accurately on an individual basis per your actual properties zip code.
Rental Market Dynamics
The rental market in San Diego has also seen notable changes. The average rent for a multifamily unit is approximately $2,500 per month, a 3% increase from 2023. The rental vacancy rate currently sits at 4.2%, indicating a competitive market. Areas like La Jolla (92037) and Downtown continue to have the lowest vacancy rates, driving demand and pushing rental prices higher.
Looking Ahead
As San Diego grapples with ongoing housing challenges, the multifamily market is likely to undergo further transformation. Developers are expected to focus on adaptive reuse projects and infill developments to optimize land use while complying with new regulations. According to a recent report by Zillow, multifamily construction permits increased by 15% in the first half of 2024 compared to the previous year, signaling a positive outlook for future supply.
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©2024 Apartment Consultants, Inc. This information has been secured from sources we believe to be reliable, but we make no representations or warranties to the accuracy of the information. References to square footage are approximate. Buyer to verify all information and bears all risk for any inaccuracies. Our blogs are provided on selected topics and should not be relied upon as a complete report of all new changes of local, state, and federal laws affecting property owners and managers. Laws may have changed since this article was published or may have been misinterpreted. Before acting, be sure to receive legal advice or consult a licensed CPA.
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