Bay Area rents are down … or up …or …

Market News

Depending on where you look Bay Area rents continue to decline, while a few cities are up slightly. According to a report by Zumper, 27 of 31 Bay Area cities showed a decrease in rental prices. By and large, more expensive areas saw decreases while the increases were in less-expensive cities.

San Francisco saw median 2-bedroom rentals dip below $3000 for the first time in six years. On the other hand, Livermore (plus 9.7 percent), Concord (plus 3.4 percent), and Vallejo (plus 4.3 percent) all saw increases.

Analysts predict both trends will continue in the foreseeable future.

Renters moving to the suburbs

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According to Zillow, while home sales have improved since the spring, rentals in urban areas have slowed suggesting that many are choosing to live in the suburbs. Certainly, remote working makes the suburbs more attractive for some as does the fact that city dwellers are unable to enjoy many of the amenities of urban living.

So far, Sacramento and San Francisco, along with Dallas-Forth Worth and the New York metro area are seeing the largest split between urban and suburban rent growth.

Lack of affordable rental housing contributing to homelessness

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Despite low unemployment and rising incomes, homelessness continues to increase – up 0.3 percent for the second straight year – and most analysts cite the lack of affordable rental properties as the prime reason.

Not surprisingly, the most expensive metro areas are seeing the greatest jumps in homelessness. Currently, nearly one quarter of the country’s homeless populations lives in either New York or Los Angeles where rents have risen 20 percent and 35 precent, respectively since 2012. In Seattle homelessness has increased by 4 percent in 2018 while rents have risen 64 percent since 2012.

Co-living is growing

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Co-living: where tenants rent a small room in a larger apartment or home and share common ares such as kitchens and living rooms is a concept slowly coming to reality in high-priced areas such as San Francisco, San Jose, and New York City.

The idea first surfaced about ten years ago and often featured developers retrofitting older buildings resulting in private rooms which were very small. The current movement is towards larger private spaces.

Developers are convinced that making urban living affordable in cities such as San Francisco or San Jose are what makes the concept viable. Analysts predict that reenters may be able to get co-living space in the Bay Area for $1,600 to $3,100 per month, considerably cheaper than the rent on a studio apartment.

Fewer families buying homes

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Over the last decade the number of US families (parents with children) owning homes decreased by 3.6 million. In the Bay Area (including San Francisco) the number dropped by 10 percent or 31,000. Meanwhile, the number of families renting increased by 57,000 or 33 percent.

The reasons behind this trend are simple: between 2006 and 2016 Bay Area rents increased by 39 percent while home prices increased by 80 percent.

Rents Rise, Vacancies Decrease, Renewals Strong

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According to a recent report, rents in March 2018 showed an average increase of 4.2 in rates, a continuing trend. yet, while rates increase the vacancy rate decreased for the fifth consecutive month to 4.4% in March (it was 4.6% in February).

Finally, the renewal of expiring leases continues to be very strong at 75.8%.

Surprise! Bay Area Rentals to Continue to Increase in 2016

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As we reported earlier in the month (Rents Continue To Increase Faster Than Incomes) rents are going up and the San Jose Mercury News believes this trend will continue for the foreseeable future. Analysts are projected a 7 percent increase in 2016, this on top of 2015 increases of 10 percent in San Francisco, 11 percent on the Peninsula and 12 percent in the East Bay.

Part of the reason for the continued increase is the number of new units in the area. Of course, developers want a return on their investment as soon as possible and the strong demand only serves to drive up prices even higher.

For many, of course, the sharp increases are simply out of their price range and they move away, often times out of state. For others, they continue to hope that the housing market has reached it’s peak and will stabilize – soon.

Renters Beware!

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The Neighborhood Law Clinic at the University of Wisconsin Law School estimates that several million families will face evictions nationwide in 2015.

The reason: across the country rents have risen 7% in the past year while incomes have increased only 1.8%. Traditionally renters spent 25% of their income on rent; according to Zillow that percentage is now approaching 30.

While many will leave “voluntarily” due to the rising cost, others may miss a payment or – according to the Eviction Defense Collaborative – be evicted for a minor violation.

All in all, a tough time for renters; may be time to buy!

Household Costs More of a Burden for Renters Than Home Owners

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According to the U.S. Census’ 2013 American Community Survey, housing cost burdens fell for the third consecutive year. In 2013, 39.6 million households spent more than 30 percent of their income on housing, a decrease from 40.9 million in 2012 and significantly below the high of 42.7 million in 2010.

However as housing cost burdens continue to decrease for home owners, they are continuing to rise for renters. In 2013, 26 percent of home owners were considered burdened by household expenses – spending more than 30 percent of their income on housing, compared to nearly half of all renters at 49 percent. In addition, the number of renters continues to rise and rental rates are increasing much faster much incomes.

Bay Area Rents at an All-time High

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This won’t come as a shock to anyone living – or hoping to live – in the Bay Area but rents are at all-time high.

RealFacts of Novato reports that Bay Area rents increased 11.4 percent from last year with the average rental now $2,234 per month. A study a studio apartment now costs an average of $1,931 per month, which is an increase of 12.5 percent while two-bedroom, two-bath apartments now average $2,562 a month, which is 9.8 percent higher than a year ago.

Despite the unprecedented increase, would-be renters are having a tough time finding a place to live. Occupancy rates throughout the area remain at more than 95 percent which is considered full occupied.