Santa Barbara Independent: Brian Johnson: Santa Barbara’s Multifamily Housing Market Returning to Normal

Strong demand for apartments has helped to keep vacancy numbers compressed, but we have seen some easing of that with the delivery of several new development projects and there are still more under construction.

Currently, according to CoStar, apartment vacancy stands at 4.4%, while rent growth has actually declined by .5% over the last 12 months. We attribute this to property owners and tenants working out rent reductions to cope with COVID, and fewer tenants looking to make moves during COVID.

While larger projects from the Towbes Group and John Price in Goleta are in the pipeline, we have many smaller projects underway in Santa Barbara that are being built under the Average Unit Density (AUD) program.

We could see that vacancy level rise slightly, closer to a healthier level for a market our size. However, demand remains high for housing in our area as the sales market for homes continues its hot run, and it is only hampered by a lack of inventory.

On a broader scale, we continue to see large cities like San Francisco, San Jose and Los Angeles experience compressed rents over the last 12 months. Over the same period, interior markets such as Sacramento and the Inland Empire have seen positive rent growth between 6%-7%.

However, based on the economic recovery, this could be the last month of flat rent growth for the larger gateway cities. The month-to-month comparisons continue to flatten and should see growth by the summer.

Returning to our local market, when looking at investment properties of five units or more, there have been five sales along the South Coast of Santa Barbara County so far this year with two more in escrow. Compare this to the first quarter of 2020, which had only three sales.

The first quarter of 2020 did not see the immediate impacts of COVID-19 as the number lines up with the number of sales on average during the first quarter of the last several years. Truly, the largest impact on sales is inventory. Buyers remain active and interested, even during COVID-19.