"High home prices and a recovering local economy will keep the San Diego apartment market among the best in the nation in 2004," says Kent R. Williams, a Marcus & Millichap vice president and regional manager of the firm's San Diego office.
As Marcus & Millichap's findings point out, San Diego employment is forecast to rise by 0.3% in 2003 and then experience an "accelerated growth" of 2.4% in 2004. The report goes on to say that the manufacturing, information and service sectors are all expected to pick up steam in the next year. The creation of additional service-level jobs, in particular, will play an important role in the next year, as it will promote the growth of the 20- to 24-year-old age group in the region. "In 2004, this age cohort is expected to expand by 2.8%, which will keep the local apartment market tight over the next year," say Marcus & Millichap's researchers.
While the creation of new jobs is luring new residents to San Diego County, the high price of single-family homes is ensuring that most of them will remain as apartment tenants for years to come. According to Marcus & Millichap's research, the median home price in San Diego is currently $420,000, compared to $369,000 one year ago. And when looking at new construction, the figures only climb higher. The report says that the median price of a new, single-family home is $568,000, up from $491,000 last year.
Meanwhile, San Diego apartment rents continue to climb, despite a slight uptick in vacancy rates. By year-end, "vacancy is expected to reach 4.1%, a 60 point basis increase from 2002, but down 30 basis points from the third quarter of 2003," according to Marcus & Millichap's research. The report points out that vacancy steadily rose during the first nine months of 2003, increasing 90 basis points to its peak of 4.4%, "but is expected to register improvement during the fourth quarter." Rents, however, do not seem to have been affected, as Marcus & Millichap's researchers say the average asking rate was $1,095 per month for the third quarter of 2003, up 3.4% from the same period last year. And by year-end 2003, the average monthly rent here is expected to rise to $1,105.
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