The Vallejo housing market is heading into the stratosphere, being pushed there by what’s happening to real estate in the rest of the Bay Area, experts say.
Two separate studies released this week show the Vallejo area remains the nation’s hottest real estate market and that rents here are also sharply on the rise.
“The steep rise in Vallejo’s rents is likely a ripple effect caused by the expensive rents in San Francisco,” said Apartment List’s Andrew Woo. “As renters get priced out of San Francisco, Oakland, and Berkeley they are moving to cities that are a little further away and less expensive. Rents are increasing elsewhere in the East Bay as well.”
The most recent monthly report by Apartment List, which tracks rent growth, median prices, and market trends, finds Vallejo’s rents rising faster than many other areas.
While rents here have declined .2 percent over the past month, they have increased significantly — 5.1 percent — compared to a year ago.
Median rents in Vallejo stand at $1,090 for a one-bedroom unit and $1,380 for a two-bedroom, the report shows. Vallejo’s year-over-year rent growth leads the state and national average (3.9 percent, and 2.6 percent, respectively).
But, everything, including rent, is relative, Woo said.
“For people who are moving from San Francisco, rents (in Vallejo) may seem inexpensive, but for those already living in Vallejo, rent increases will be steep,” he said. “We’re seeing this trend in other cities outside of core cities that had large rent increases; for example, Tacoma, Wash. (outside of Seattle) and Arlington, Texas (outside of Dallas). This trend is discussed in our national rent report.”
Javier Vivas, economics research manager for realtor.com, says his firm’s latest report shows a similar trend.
“Vallejo has retained first place in the realtor.com hotness rankings for the last four months, benefiting from spillover demand from the Bay Area and other adjacent markets — where the lack of affordable homes for sale continues to push buyers into outlying areas,” he said. “In May, the median list price in Vallejo reached $440,000, less than half the price tag of an equivalent home in San Francisco. This continues to drive interest from priced-out buyers, particularly those looking for starter homes, making Vallejo a very attractive option financially.”
As is the case with most California markets, homes in Vallejo are in short supply, and when they do go on the market, they get a record number of eyes, with half of homes selling in under 30 days, Vivas said.
Realtor.com’s May Data Preview ranks the Vallejo-Fairfield area No. 1 on the May Hotness Index of the top 20 national markets, company officials said.
While realtor.com’s list of the country’s 20 hottest real estate markets in May still features nine from California, six of those have dropped at least two spots since April, the report shows.
Solano Association of Realtors President Linda Daraskavich said she sees both trends are intimately related.
“As the price of homes rise, so do rents, and unfortunately, that (could make things harder) for renters,” she said. “We really need more rental inventory.”
But, inventory alone won’t keep some people from being priced out of the local real estate and rental markets, Daraskavich said.
“It may make it impossible for renters to live here,” she said. “I’m not sure that it will be a bad thing for the city, but I do think that the city should make it easier to change zoning and permit processes so that more rentals could be made available.”
Vivas said the housing market nationwide is on fire.
“This is officially the most competitive, fastest-moving spring housing market in decades,” he said. “Some places like the Bay Area have become too hot to handle — and now a lack of inventory and affordability are allowing other markets to catch up.”
Last month, there were more prospective buyers and homes are selling more quickly than during any other May since the recession, he said.
“For the first time, one in three homes nationwide are selling in under 30 days,” Vivas said. “The lack of affordable homes for sale remains a critical issue, particularly for a growing number of first-time home buyers and millennials, who are lining up for starter homes but can’t break in.”
The bottom line seems to be that though homes are relatively inexpensive to buy or rent in Vallejo compared to the rest of the Bay Area, they are nevertheless rising at breakneck speed.
“The word is out, Vallejo is the place to be, with all the great things happening here,” Daraskovich said. “People want to be here, plus housing is still the most affordable in the Bay Area.”
Contact Rachel Raskin-Zrihen at (707) 553-6824.