Falling rents? What a concept — especially in the Bay Area, ground zero for out-of-sight rent increases over the past few years.
Yet a new study indicates the trend could be changing. Abodo, an apartment search website, says monthly rents dropped markedly from August to September in San Jose and San Francisco. Those cities were on Abodo’s Top 10 list for the “Biggest Fall” in rents for one-bedroom apartments during that period.
The website’s National Apartment Report for September shows the average monthly rent for a one-bedroom apartment in San Jose dropping from $2,790 to $2,455, a 12 percent decline — and the second-largest decrease among U.S. cities. A one-bedroom in San Francisco fell 6 percent, from $3,952 to $3,698, the seventh-largest decline.
Of course, Abodo’s findings for a single month must be taken in context — as one piece of a continually unfolding picture. Still, the website’s numbers fit a pattern: Over the last year, a variety of organizations and experts have said the pace of rent hikes is slowing in much of the Bay Area, and perhaps is flattening.
Some observers are emphatic: “The prices have reached their saturation point,” said Ron Stern, CEO of Bay Rentals, a housing relocation service. “Tenants cannot be soaked for one extra dollar.”
Particularly in Santa Clara County, he said, “the rental market has slowed down to almost a crawl. We do a lot of credit reports, and the number of reports we’re doing has declined. … Landlords say, ‘Is my price too high? I’m not getting any calls.’ ”
The cooling apparently has yet to reach Oakland. From August to September, according to Abodo, rents climbed from $2,254 to $2,299, a 2 percent increase — the nation’s 23rd-largest increase in rent price.
The notion that Oakland rents still are playing catch-up with the Peninsula and San Francisco was also born out by data reported in July by Novato-based RealFacts. Its second-quarter report showed Oakland rents rising a hefty 5.4 percent on a year-over-year basis. Still, that was down from 7.2 percent and 13.7 percent increases, respectively, in the previous two quarters.
Across the Bay Area, the years-long run-up has put the squeeze on typical income earners, who easily can spend half of their pretax wages on rent.
“While incomes have gone up dramatically, rents also have gone up to the point where we’ve reached an equilibrium,” said Jeffrey M. Mishkin, regional manager at the San Francisco office of Marcus Millichap, a real estate brokerage firm. For much of the region, rents “either can’t or don’t need to go up anymore.”
From August 2015 to August 2016, he said, San Francisco’s rental market “was flat.” “One-bedrooms were down 7.7 percent year-over-year, from $3,395 to $3,150. Two-bedrooms were down from $4,500 to $4,300, a 4.7 percent drop.”
Plus, he just had received an informal report about a “very large owner” of apartments on the Peninsula “who said that rents are down on every one of his properties.”
And yes, Oakland rents have continued to rise as the city attracts young professionals looking for some affordability and easy access to jobs across the bay. Even so, Mishkin said, East Bay brokers sense a slowdown: “The smaller units are renting quickly. The larger, more expensive units are taking longer.”
Stern advised apartment hunters to look in smaller apartment developments, rather than the larger — and often more expensive — complexes.
“You can get a nice place for $1,600 or $1,700, maybe less,” he said. “There’s a nice duplex in Campbell for $1,850 in a good neighborhood. The landlord says, ‘I don’t want to squeeze it for an extra 200 bucks. I just want to get it rented.’”
“Landlords beware,” he warned. “People are shopping price, not quality, right now.”
If so, Abodo’s future reports could show continuing declines. It based its September findings for San Jose, San Francisco and Oakland on a sampling of 6,701 properties, according to Sam Radbil, the website’s spokesperson.
At a glance
Here are a few other highlights of the report:
- Miami led the nation for the biggest rise in rent for one-bedroom apartments: a 9 percent increase, from $1,599 to $1,739.
- Seattle scored the largest fall in rent: 13 percent, from $2,170 to $1,890.
- Three California cities made the Top 10 for “Biggest Rise”: Bakersfield, up 9 percent; Fresno, up 6 percent; Riverside, also up 6 percent.
- And four California cities made the Top 10 for “Biggest Fall”: In addition to San Jose and San Francisco, they are Los Angeles, down 8 percent, and Long Beach, down 7 percent.