This area has unseated San Diego as ‘most competitive’ rental market in California

Above: A Nexstar video on whether to buy or rent a home.

SAN DIEGO (FOX 5/KUSI) — It is no secret that the housing market in San Diego is rough for renters, but this year so far, renters have not fared quite as bad here as in other places in California.

In what was described as a “surprising turn,” Silicon Valley usurped San Diego and other Southern California metros, Orange County and Eastern Los Angeles, to take the top spot in a new report on cities where prospective lessees have faced the stiffest competition this year thus far.

The latest report from RentCafe comes less than a year after the real estate website dubbed San Diego the most competitive rental market in California during the peak rental months of 2023 — the first time America’s Finest City has come out on top of Orange County in several years.

In last year’s report, the two areas ranked 18th and 19th respectively as the busiest markets in the U.S. for renters out of dozens of metros that were analyzed by RentCafe.

In the first few months of 2024, San Diego has held onto the 18th spot on the top 20 “most competitive” ranking, with Silicon Valley, Orange County and Eastern Los Angeles all surging ahead during the the annual moving season.

For the report, RentCafe looked at a wide range of data tied to the rental market between the months of January and March, including vacancy rates, the number of renters that applied for the same apartment and the number of people who renewed their leases.

With these metrics, San Diego’s competitiveness held relatively firm positionally compared to other metro areas in the U.S., but appeared to ease compared to last year.

According to RentCafe, 94.8% of all units were occupied in the first six months of 2024, leaving 10 prospective renters to vie for the same unit. Last year, about 96% of all units were considered occupied, meaning 17 renters were competing for the same on-the-market unit.

Meanwhile, those available units have been on the market for an average of about 43 days before a lessee can be found, down from 33 days last year.

The region also saw a lease renewal rate of about 53%, which could have attributed to the ease in competition as it did nationwide. However, that rate is notably the second lowest of all California metros on the “most competitive” list, coming ahead of just Eastern Los Angeles.

Last year’s high competition was largely attributed to the severe shortage of housing amid strong population growth within San Diego, the report found.

While San Diego has made strides the towards expanding housing availability, including the city building more units in the last year than it has in nearly two decades as the San Diego Union-Tribune reported , that has not yet been reflected by the rental market’s competitiveness.

In the first months of the year, only 0.06% of the housing supply accounted for new constructions, according to RentCafe — a big dip from last year’s share of newly built units at 0.2% during the rental season’s peak.

The same cannot necessarily be said for Silicon Valley and the other California metros that surged on the “most competitive” list, according to RentCafe.

Both Silicon Valley and Eastern Los Angeles saw no new units come online at the beginning of the year despite nearly full rates of occupancy.

For Silicon Valley, the scarcity of options amid a technology industry rebound helped catapult the city to 6th in the U.S. According to RentCafe, units in this area have stayed on the market for an average of 40 days in 2024, with 12 prospective renters competing for one unit.

Similarly, Eastern Los Angeles’ market competitiveness has been driven by a limited number of existing options paired with an influx of people into the area — renters who have been priced out of apartments in central Los Angeles, RentCafe said.

On the other hand, Orange County saw a larger share — about 0.38% — of newly built apartments become available. In spite of this, fierce competition for renters remains, given its highest-in-the-state lease renewal rate which RentCafe said kept occupancy rate at nearly 96%.

Outside California, Miami, Florida remained the hottest rental market to kick off the rental season, with Chicago, Illinois and northern New Jersey close on its heels, according to RentCafe.

Across the U.S., the report found a majority of apartment dwellers — about 62% — opted to stay in their current unit at the year’s start, which researchers attribute to the inability of renters to transition to homeownership as well as “better deals and incentives” added to renewal contracts.

A full list of the top 20 most competitive rental markets this year so far can be found below.

To compile the report, RentCafe’s research team analyzed Yardi Systems apartment data across 137 rental markets in the U.S. The data came directly from market-rate large-scale multifamily properties of at least 50 units, according to the website. Fully affordable multifamily properties were excluded from the analysis.

The markets were then ranked by their market competition score, which was calculated based on five metrics: apartment occupancy rate, average total days vacant, prospective renters per vacant unit; renewal lease rate, and share of new apartments completed during the same timeframe — and their averages for January to March 2024.

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