Apartment rentals plummet in California cities
The California apartment market is on a bumpy road to recovery. Currently, most major metros in the state are experiencing significant declines in apartment rents. May report from Apartment Guide found that San Francisco, Oakland, Los Angeles, and San Jose all rank among the top US cities with the biggest drop in one-bedroom rental rates. San Francisco and Los Angeles lead the nation in rent cuts.
Rents for one-bedroom apartments in San Francisco and Los Angeles fell 18.9% and 18.4% respectively, the highest in the country. San Jose ranks fifth in the nation with one-bedroom rents down 15.3%, and Oakland ranks eighth with rents down 14.2%.
Affordability seems to play a key role. All California cities where apartment rents are falling are also among the most expensive markets in the country. “Although prices in California are falling, it’s still one of the most expensive areas in the country for renters,” Brian Carberry of Apartment Guide told GlobeSt.com. “I think the demand in California for renters has gone down in these areas as people realize that more affordable options can be found outside of the major cities or even in neighboring states.”
When it comes to two-bedroom rents, only San Jose was in the top five for rent cuts, and it was number five. Smaller metros top the list, including Seattle, Miami, Philadelphia, and Lexington. Carberry, however, was quick to note that even though these cities didn’t rank high on the list, they were still seeing two-bedroom rents go down. “Local markets are very volatile right now, so in my opinion it’s less important to look at the order in which they go down and just look at trends,” he says. “Prices in these high priced areas have been trending lower for some time, however, if the rate of decline is decreasing, it could be a sign that we are bottoming out in prices. We will however need to watch for a few months to see if is an outlier.
Looking at California as two halves, Northern California is in more trouble than Southern California. Los Angeles is the only market in Southern California to see a significant drop in apartment rents, but surrounding markets, even those in the greater Los Angeles area, such as Long Beach, have actually seen an increase in rental rates. in one and two bedroom categories. “The exception in Northern California is Sacramento, where prices have been on the rise and have been for some time during the pandemic, which could be an indicator of popularity as a more affordable option for city rents. Bay Area,” Carberry added.
Carberry expects these cities to continue to see lower rents this year. “I believe if we’re not at rock bottom yet, we will be soon,” he said. “As the economy and states reopen, demand will increase for people seeking to live in urban areas compared to what it was during the pandemic. Mix that with the crazy housing market right now, and you might have more people deciding to rent right now instead of buying. This demand will put pressure on the rental market and we will see prices in some cities or neighborhoods increase to reflect this.