Tom York on Business: Falling Rents a Silver Lining Amid Slowing Economy

Well, the general slowdown in the economy is a silver lining for would-be renters in an otherwise sky of gray clouds.

Residential real estate website Zillow in a recent data analysis has found that typical rents in San Diego fell a bit month-over-month this fall.

To be sure, the typical rent was up nearly 13% from last year, to $3,105 in October, which puts us in third place nationwide for a year-over-year increase, Zillow found.

There is a nationwide pattern of declining rents, with typical prices falling 0.1% month over month. This marks the first monthly decline in 2 years.

U.S. typical rent was $2,040 in October, up 10% from 2021.

“According to our economists, the small step down is reminiscent of a more ‘normal’ rental market, in line with October declines seen in each of the three autumns before the pandemic” said a spokeswoman for Zillow.

According to the company, rents have dropped in all but nine of the top 50 largest U.S metro areas — among them posh markets like Boston and Miami and more affordable Midwest metros such as Cleveland and St. Louis.

California cities boast the most expensive major markets, such as San Jose, where typical monthly rent is $3,341, San Francisco at $3,199, San Diego at $3,105, and LA at $2,979.

Miami and New York had the highest year-over-year increases

Rent increases have subsided after reaching a peak of 17.2% year-over-year in February 2022.

Americans’ demand for housing has waned this year, after booming in 2021, thanks to higher costs of rent and generally high inflation, Zillow found.

The analysis said more tenants are doubling up with roommates or family, pushing up the rental vacancy rate and putting some pressure on landlords to keep rent hikes in check.

This slower pace of rent growth is likely to show up in official measures of rent inflation in early 2023.

* * *

Zillow has also taken a look at the impact of rising rents on tenants.

According to the company, a San Diego renter has to work 85.5 hours each month before earning enough to pay the region’s typical rent of $3,110, the new Zillow analysis shows. That’s up from 74 work hours needed five years ago. 

Rents grew faster than ever last year, squeezing budgets when leases expired, and renewals came due.

The rental market is cooling now, says a Zillow spokesman, but rent declines haven’t fallen sufficiently to have much impact on the wallet. 

 While rents have grown, wages haven’t kept up with inflation, said the spokesman. Rents in the San Diego metro have grown 46.9% over the past five years. The average wage is up only 27%.

 “Searching for a rental in this market is stressful — 40% of renters lose sleep during their search. Strategies such as being flexible about move-in date and being one of the first applicants have helped recent renters find a place,” he said.

Americans making an average wage need to work for 62.6 hours to pay the typical U.S. monthly rent. 

Over the past five years, rents have grown 36.9%, while the average wage is up only 23%. 

* * *

Stone Distributing Co. said it will distribute beer made by Coronado Brewing Co. in Southern California and will represent a large swatch of Southern California. 

Coronado Brewing says its sales are currently up 20% year-to-date.

Stone Distributing, founded in the late 1990s, is now among the largest independent distributors of craft-only beverages in the country.

The distributor became a standalone operation, breaking off from Escondido-based Stone Brewing earlier this year.

* * *

Sacramento-based pizza purveyor and franchisor Pizza Guys — is opening its first San Diego store in Pacific Beach.

The store is located on 1975 Garnet Avenue, and will be operated by local entrepreneur Behzad Kazemi, according to a news release.

The chain said it hopes to have more locations in the area in the future.

* * *

The 2,670-passenger cruise ship Diamond Princess has set sail from its new home in San Diego. The homeporting of the ship here highlights a group of new sailings from operator Princess Cruises, ranging from five- to 16-days with excursions along the Mexican Riviera, California coast and the Hawaiian Islands. 

The schedule also features a unique 20-day roundtrip cruise to Central America on Nov. 27, according to a news announcement. The cruise line is part of the publicly held Carnival Corp.

San Diego is the third busiest cruise port in California after LA and San Francisco and handled 93 ships before the COVID pandemic struck in 2020.

Port officials expect the terminal, which can accommodate three ships at a time, will recover this year, with more than 90 cruises ships docking at the city’s two terminals during the height of the season.

Princess cruises operates a total of 15 ships in various global markets.

* * *

Kearny Mesa Subaru will ring in the holidays with its annual “Share the Love” food truck event, which will benefit local nonprofit Meals on Wheels San Diego County.

This event is open to the public and draws some of San Diego’s best food trucks to support area nonprofits, including Meals on Wheels.

The trucks will compete for the title of “Best Dish” with local celebrity judges voting on the winning food truck.

Go to sandiegomealsonwheels.org for more information.

Over the past 14 years, Subaru of America and its dealers have donated than $227 million to more than 1,700 hometown charities nationwide.

* * *

And finally, back to news related to residential real estate.

Investor home purchases fell 30.2% year over year nationwide in the third quarter, according to a new report from residential real estate sales and rental site Redfin.

The report said this is the largest decline since the Great Recession aside from the second quarter of 2020, when investor activity plummeted due to the onset of the pandemic.

And it outpaced a 27.4% drop in overall home purchases nationwide.

Many of the cities where investor purchases declined are regions that soared in popularity during the pandemic, according to the report.

These regions included San Diego, along with Phoenix, Las Vegas, Sacramento and Miami, which consistently rank on Redfin’s list of top migration destinations.

Investor purchases dropped nearly 35% here in October compared to October 2021.

Tom York is a Carlsbad-based independent journalist who specializes in writing about business and the economy. If you have news tips you’d like to share, send them to tom.york@gmail.com.