Home News San Francisco rent prices have diverged from every other big U.S. city in one key way

San Francisco rent prices have diverged from every other big U.S. city in one key way

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The San Francisco apartment leasing market recovered most slowly in the country after a surge in vacancies early in the pandemic and a sharp drop in rents. New data shows..

In fact, according to the real estate list website Apartment List, San Francisco is the only metropolitan area in the United States, paying less for apartments than it was before the coronavirus broke out more than two years ago. South Bay is just behind, and San Jose’s metropolitan area has been the penultimate place for rent growth since the pandemic began.

Data show the population of Sanbert, where the economy of the Bay Area and the rental market showed an influx of lessors during the pandemics of other big cities in the United States, especially the pandemics that caused vacancies to plummet and rental prices soar. Rob Warnock, Senior Research Associate at the Apartment List, shows how far away from the crowded areas. The two-year course is described.

“San Francisco is the last metropolitan area in a country where rents are cheaper today than in March 2020,” he said. “San Francisco had a very difficult time pulling economic activity back to some of its most densely populated areas.”

The San Francisco area is one of the country’s most remote work-intensive areas, with many employers in both the public and private sectors after offices were emptied during a pandemic. , The workers are hesitant to return home. As a result, lessees are slower to travel than other major cities.

“Vacancy and rent usually move in opposite directions, so prices fell sharply in 2020, when vacancy rates surged (in San Francisco),” Warnock said in an email. “In 2021 and 2022, vacancies decreased and rents returned to pre-pandemic levels.”

But the Bay Area market recovery is “significantly slower” than elsewhere, Warnock said.

According to apartment list data, vacancy rates in the San Francisco metropolitan area surged from 5.3% in March 2020 to 9% in October 2020. At the same time, the median one-bedroom rent fell 15% from $ 1,966 in March 2020 to $ 1,662 in December 2020.

In the San Francisco metro area, vacancies gradually recovered until 2021, dropping to the current 5%. However, the recovery of rental prices has been delayed. The median rent for a one-bedroom apartment was $ 1,916 last month, still about 3% below the initial level of the pandemic.

Warnock added that rent increases in the San Francisco region should also be relatively curtailed, as demand for apartments that continue to stop the sharp decline in vacancy rates is relatively low.

“Rents should continue to rise during the summer, and metro rents are expected to reach 2020 levels in the coming months, but lag behind other big cities without a large influx of new demand. I think things will continue, “he said.

Even in the San Jose metropolitan area, vacancy rates rose from 5.6% in March 2020 to 9.5% in October 2020 in the early days of the pandemic. Rents for one-bedroom apartments fell 18% from $ 2,174 in March 2020 to $ 1,790 in December 2020. ..

However, the San Jose region recovered faster than San Francisco. In May 2022, vacancy rates dropped to 4.33%, with one-bedroom rents averaging $ 2,186.

A similar pattern, what Warnock calls a “U-shaped price curve that reflects an inverted U-shaped vacancy curve,” is in other major metropolitan areas across the country, especially in coastal areas such as Seattle, Washington DC, and New York. It was seen.

The vacancy rate of Boston Metro surged from 6.3% in March 2020 to 9.9% in August 2020, but there has been a significant recovery since then, and the vacancy rate in May 2022 was at the start of the pandemic. It was below 4.3%. .. Rent for one bedroom is 13% higher than the start of the pandemic.

Vacancy changes in New York were not as extreme as some of the other major metros, rising again from 4.2% in March 2020 to 6.1% in September 2020. Currently, the vacancy rate in May 2022 is very low at 3.2%, and the rent is 15% higher than in March 2020.

Warnock said it was unclear why cities such as Boston and New York had made such a strong recovery, but Boston, with its relatively concentrated colleges, attracted many returnees and said, “Finance and more. Major non-technical industries, and the law, may be stimulating more economic activity in central New York City, “he said.

On the other side of the spectrum are the many cities of Sunbelt, where apartment vacancies plummeted and rental prices soared in two years.

According to Warnock, these areas had many attractive features for renters trying to escape from metropolitan areas like San Francisco.

“Mostly concentrated in the Sunbelt, but also scattered around major coastal metros, these are families seeking relief from city blockades, small settlements, and soaring living costs. It’s a more “affordable” metro, “he said. ..

Two notable examples are Tampa, Florida and Las Vegas.

The vacancy rate in the Tampa metropolitan area at the beginning of the pandemic was 6.8%, but dropped to 2.7% in August 2021. Meanwhile, one-bedroom rents increased by 40% from March 2020 to May 2022.

The Las Vegas metro area fell from a vacancy rate of 6.6% in March 2020 to a low of 2.5% in August 2021. During the pandemic, one-bedroom rent increased by 34%.

However, some of Sunbelt’s popular rental markets are beginning to show signs of chilling as vacancy rates rise-rents continue to rise, Warnock said.

Since reaching the lowest level in August 2021, vacancy rates in Tampa and Las Vegas have begun to rise, reaching 5% in May 2022.

“In 2022, the trend slowed, but the slight improvement in vacancy rates slowed,” Warnock said.

According to the apartment list, rents have recently begun to skyrocket in some metropolitan areas, which were late in the early days of the pandemic. In particular, San Jose, which has seen the largest increase in rents in the country in the past six months, was 7%. Latest monthly all national rent report.. New Orleans, Louisville, Salt Lake City and Dallas are the other metros in the top 10 in price increases over the last six months, all above 6%.

Soaring rents and new construction in previously affordable markets could be one of the factors driving recent trends, according to Warnock.

“On the demand side, it could suggest new migration of lessees who can’t absorb the rent growth in the pandemic era,” he said. Construction industry. “

Soaring inflation is putting pressure not only on affordable housing, but also on the cost of many commodities, from food to transportation, Warnock said.

“High interest rates on mortgages and high construction costs can also reduce the rate at which apartment vacancy rates bounce back, as lessors can’t afford to vacate rental properties and buy a home instead,” he said. Told.

In that analysis, the Apartment List looked at website data for a list of the 100 largest metropolitan areas. The median rent was calculated based on a specific market and a new lease signed in the month. The vacancy index for each location includes properties that have been on the apartment list platform for more than 6 months and is the daily vacancy rate for each property in the location, weighted by the number of units in each location. Calculated based on the average. property.

Kelly Fan is a staff writer at the San Francisco Chronicle. Email: [email protected] twitter: @KellieHwang

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