As renters have begun emptying out of the nation’s most expensive cities due to the one-two punch of the coronavirus pandemic and ensuing recession, monthly rental prices in those areas are nosediving.
Rents for September have plummeted the most in ultrapricey San Francisco compared with a year ago, according to a recent report from rental website Zumper. Median prices dropped by 14.1% in San Francisco, to a still very high $3,040 for one-bedroom apartments on the market.
This happened as some big tech companies based in the San Francisco Bay Area, like Google and Twitter, announced employees could work remotely for a year—if not forever. That enabled those accustomed to paying small fortunes on housing each month to relocate to cheaper parts of the country.
Prices dropped by about 7.2% for one-bedroom units in the nation’s most expensive rental markets compared with September 2019. Meanwhile, they rose by an average 4.8% in the country’s least expensive markets.
“Since [COVID-19] really started to affect the U.S. market in March, it has dramatically decreased the amount of people commuting to work every day—either because of social distancing measures or layoffs resulting from COVID-19’s effect on the economy. Given this, there is less of a reason for Americans to cluster in urban centers,” says Zumper analyst Neil Gerstein. “We believe this has caused a migration shift, and a subsequent demand shift, to historically cheaper cities.”
The site analyzed more than a million rental listings to calculate the median rents in the 100 largest cities and almost 300 more cities within larger, metropolitan areas. (Metros include the main city and surrounding suburbs, towns, and smaller urban areas.) Only listings on the open market, and not currently occupied, were included.
Other exorbitantly priced cities experienced similar double-digit declines. Median rents fell 11.5% year over year in San Jose, CA, in the heart of Silicon Valley, to $2,750 for a one-bedroom unit in September and decreased 10.9% in New York City, to a median $2,700. Rental prices also fell substantially in Salt Lake City, by 10.7%, to $1,000 a month; Denver, by 10.6%, to $1,430; and Washington, DC, by 10.5%, to $2,050. Median rents dropped 15.8% in the college town of Syracuse, NY, about four hours northwest of New York City, to $800.
Expensive cities that saw steep, but single-digit, price drops included Boston, where rental prices fell 8%, to a median $2,300 a month; Los Angeles, by 8.4%, to $2,040; and Seattle, by 9.6%, to $1,700.
“It is likely that prices will continue to decrease for some time into the future before they stabilize,” says Gerstein.
Where are monthly rents going up?
While prices fell in the country’s most expensive rental markets, they actually shot up dramatically in some of the more affordably priced Midwestern and Southern cities. Monthly rents have more room to grow in these places. And they may be seeing a boost in demand as renters from more expensive markets flee the big cities seeking more reasonably priced urban areas where they can get more square footage for their money.
“We largely attribute this to shifts in migration and demand within the country as Americans opt for cheaper places to live in the wake of COVID-19 and the recession,” says Gerstein.
The other highest annual increases were in St. Petersburg, FL, by 15.7%, to $1,330; Lincoln, NE, by 15.7%, to $810; Indianapolis, by 15.6%, to $890; Detroit, by 15.6%, to $740; Norfolk, VA, by 15.5%, to $970; Des Moines, IA, by $15.4%, to $900; Baltimore, by 15.3%, to $1,360; and Cleveland, by 15.3%, to $980.