“The average monthly price for a rental home in the San Francisco area, which includes San Francisco, San Mateo and Marin, leapt $251 over the past two years, from $1,579 in the third quarter of 2006 to $1,830 in the same quarter in 2008, according to data released Friday by national research firm Reis Inc.”
Civic Center / Downtown: Up 21.5% from Q3 2006 to Q3 2008
(Q3 2006: $1,198; Q3 2007: $1,328; Q3 2008: $1,455)
Vacancy rate: 2.2 percent
Haight Ashbury / Western Addition: Up 20.6% from Q3 2006 to Q3 2008
(Q3 2006: $1,526; Q3 2007: $1,649; Q3 2008: $1,841)
Vacancy rate: 3.7 percent
West San Francisco: Up 18.5% from Q3 2006 to Q3 2008
(Q3 2006: $1,655; Q3 2007: $1,762; Q3 2008: $1,961)
Vacancy rate: 5.3 percent
Marina / Pacific Heights: Up 15.7% from Q3 2006 to Q3 2008
(Q3 2006: $1,908; Q3 2007: $2,075; Q3 2008: $2,208)
Vacancy rate: 2.4 percent
South of Market: Up 15.6% from Q3 2006 to Q3 2008
(Q3 2006: $1,898; Q3 2007: $2,079; Q3 2008: $2,194)
Vacancy rate: 4.3 percent
Russian Hill / Embarcadero: Up 11.8% from Q3 2006 to Q3 2008
(Q3 2006: $2,064; Q3 2007: $2,318; Q3 2008: $2,307)
Vacancy rate: 2.0 percent
UPDATE: An important point we neglected to make (but a plugged-in reader didn’t):
Reis only contacts large apartments. About 90% of the rentals in SF are in small buildings so the data is almost worthless in SF (unless all you care about is the “asking” rent at large apartments like Parkmerced or Fillmore Center)…
∙ Rents continue to climb [San Francisco Examiner]
Rents only have to go up by another 30-40% to be inline with the cost of buying. I figure another 6 years to go?
Anyone else notice there is an inverse correlation between the former price and the percentage change? Or, alternatively, despite the former average price, the increase was fairly constant in nominal terms (~$250-$300) in all of the regions listed in the article.
What would cause rents to rise a constant amount instead of a constant percentage?
This doesn’t seem to jibe with what I am seeing in southern Marin in the $3.5-$4.5K/mo range (asking prices, of course; that’s not what people are paying).
I’m paying less in rent today than what it would have rented for in 2001, and even less than what it would have fetched two years ago (the remodel craze apparently put some pressure on SFH rents by families who were remodeling their own properties). I expect rents to fall over the next year, and that’s why I signed a 1-year lease with option to renew for a year at the same rate. (I guess property owners aren’t expecting increases either, or a “free” option to renew at the same rental rate wouldn’t have been available.)
I guess it’s all very micro.
An important piece of the puzzle. Note that these figures are averages, not medians.
The story is also too light on details to provide anything meaningful. No data or information on what the figures pertain to — All units? Some specific type of unit? Newly rented units? Any control for changes in mix? How have vacancy rates changed over this period?
“Russian Hill / Embarcadero” rents went down in the last year while “Haight Ashbury / Western Addition” rents were up 11.6%? Hard to imagine both those could be correct.
Trip-
In a climate like this, in what segment would you expect the biggest change? I’d think on the low end, as the downturn has not yet begun to hit the (relatively) wealthy, so demand in Russian Hill is probably stagnate compared to the increasing demand in the WA as people lose their homes.
Hang in there. Rents will soon be going the same direction as housing in SF Prime. Lots of layoffs already, and more coming. Remember what happened after the dot com bubble burst.
I think I tend to agree with Eddy. Rents right now just seem to be set at a level equal to carring the owner’s mortgage payment (esp. in the SOMA/South Beach areas) since they are having trouble selling. At some of the current asking rent levels it would be a push versus buying. We’re probably at the front edge of the layoff wave in SF and as that moves through it should result in folks moving out of the Bay area bringing lower rents.
To add an anecdote to the micro-trends:
— last year if one was looking for a decent 2 bedroom + parking in SoMa, all prices were at $3K+ asking
— right now on CL, lots of decent choices for about $2,700 — $2,900
My guess is that the lower end rents are heating up while the upper end is stagnating at best, at least around here. Yay for all those condo towers with desperate would-be flippers renting them out!
The Polk St. side of Russian Hill is definitely getting cheaper than it used to be. I guess people are finally realizing that outside of a sports bar and a hamburger shop, there aren’t that many places to go down there (OK Aux Delices is pretty good). Seriously, rents on the Nob Hill side of Broadway are higher and rarer than the Russian Hill side. Doing day-to-day stuff and living in an actual neighborhood might trump living in a “nice” part of town? ohmigawd
Some of the cited rent increases do look questionable – I would love to see the raw data. The question and answer below come from the FAQ section of the Reis.com website:
How does Reis collect data?
Rent, vacancy and leasing data are collected by an in-house team of surveyors, calling on a minimum 40% of the known supply in every Reis market each quarter. This consistent approach to data collection is supplemented by our New Construction research team who identify and further verify new additions to supply on a continuous basis.
So Ries manually collects data by calling on “40%” of the known supply. I wonder what the compliance and veracity rates are. Small landlords account for a lot of San Francisco’s supply. Have any landlords out there ever been contacted by Reis?
Reis only contacts large apartments. About 90% of the rentals in SF are in small buildings so the data is almost worthless in SF (unless all you care about is the “asking” rent at large apartments like Parkmerced or Fillmore Center)…
rr, but the vacancy rate in “Haight Ashbury / Western Addition” is almost double that in “Russian Hill / Embarcadero.” Yet the former has seen the big recent increase while the latter fell — makes no sense. These numbers may have some validity and there may be an explanation. I’m just saying there is not enough here to know what the heck they are supposed to be indicating (and thus they indicate nothing).
I also wonder how the big landlords respond when the Reis surveyor calls? “Hi, I’m from Reis. Can I speak to Angelo? We want to know how much you’ve jacked up your rates this quarter. Can you help me?” Receptionist: “Of course we can help you – Mr Sangiacomo will be right with you.”
I’m sure that Frank & Walter and the guys at Park Merced give them the same friendly cooperation.
Perhaps rents had climbed significantly from Q3 ’06 to the last quarter, but from what I’ve seen in the last couple of months (my lease is ending – so I’ve started looking closer), rents are falling in South Beach.
The building I live in freely admits their rent rates are down, and they have seeing much higher vacancy periods due to the economy.
Apart from the potential decrease of demand coming from an economic downturn, if the condo sales market keeps going down there’s a good chance of a strong feedback loop from the sales side towards the rental side.
2 simple cases:
1 – Someone paying 3000/month today for a 2/2 that currently sells in 700s in 2 years sees a 2/2 selling in the 500s in a comparable building. He will be tempted to buy this condo, removing one renter from the market. Less demand (coming from a credit-worthy tenant!).
2 – If again condo prices go deeper down, say in the 400s for the same 2/2, buying the same place to rent it out will become more attractive, and with less pressure to squeeze tenants (because tenants can bail out, see scenario 1).
A wannabe landlord paying 800K for a 2/2 today will not accept to rent the place for 2500 if his mortgage payment is 4500. He’ll ask 3500 to 4000+ to try not be too cash flow negative, whether the market can take this rent or not. The un-rented place stays empty and that’s an artificial (and temporary) decrease in supply.
I am not saying places commanding 800K today will be worth 600, 500 or 400 tomorrow, just that softness on the sales segment does have an influence on the rental segment. They balance themselves on some level.
Haight area esp near Divis has improved markedly in the last 5 years in terms of amenities (i.e. nightlife) for young folks. Could this be skewing the perceptions of the rent figures for this area?
That will help (is helping?) delay the inevitable declines that will hit.
But these young folks are starting to get laid off, and the support jobs will also go, so this area won’t be immune.
I hate to bring this up, but the mix has changed dramatically. Places that were not remodeled flew off the market in 2006 and really nice places were available, but rare, and competition was stiff.
Now, if the place isn’t redone, it really just sits. So landlords pull it off the market, remodel it, and put it back on. Are rents higher – definitely. But some of those effects are mix effects – the places are just nicer.
And yes, I’m seeing rents on russian hill getting absolutely clobbered right now. Presidio heights is also dropping fairly fast – about 10% in the last few months.
Finally, the number of craigslist postings are at an all time high and at a point that is very unusual for November. This helpful person on craigslist regularly points out the number of postings about one Friday per month. They would normally be expected to fall in November, and last year were running about 300 listings. This year: 900 and rising.
He/She links back to his/her earlier posts at each one. You can definitely see them rising starting last spring, but by now they should have fallen, and instead have turned up. That tells me rents cannot keep going up.
http://sfbay.craigslist.org/forums/?ID=107242905
This data seems almost irrelevant in San Francisco as it has been said. If the source doesn’t site all listings then it seems to be inaccurate.
Do you think the rents would have a higher average and or higer median with the other thrown in – other meaning small complex(s) etc.
Just another anecdote for folks:
Mrs. Foolio and I (well, mostly her, she’s great at this kind of stuff), recently re-negotiated the rent of our 2BR place on Lake Street. We’re now paying less than we did in 2004, when we first moved in. We did have to agree to sign another one-year lease.
You don’t need to sample everyone or even all types of housing to get a reasonable approximation of mean and median. Economics says rents in an area will gravitate toward a market rate; statistics says a valid sample of rates will predict larger trends. The important thing is that private landlords and large corporations are competing for the same pool of renters. If the rents charged by one group were out of line with the market, renters would flock to or flee from those nonmarket rates and rents would adjust accordingly. So it may be off by a few $$ one way or the other, but I think the Reis numbers are probably fairly representative unless they’re inaccurately sampling just the high or low end.
Much more significant to differences in rents than type of landlord are things such as size, location, quality of finishes, and–in SF–parking.
Tipster and SanFronzi make interesting points: Unsold (or un-lived) condos are coming on the market, but those who can afford those types of rental prices may be more inclined to buy.
Those who are not quite ready to buy but can afford or are willing to pay rents approaching mortgage levels will expect more in return and are less tolerant of dodgy neighborhoods, un-updated kitchens, etc. This will also drive down rents for other segments — at least the “apples.” Gone are the days of “no parking, no laundry, not pets” in-law apts in the outer sunset renting for $2500, whether or not they have granite countertops. The rental market has finally hit the same point that the sales market hit a year ago — landlords can charge more, but renters will expect more.
Current craigslist postings bear this out. Prices are coming down from what they were earlier this year and there is a lot more out there. Just as in home sales — nice, intelligently priced properties rent quickly, but crap sits forever.
sunnyvalesteve, I understand that you don’t need a huge sample size to be statistically valid – but I was posing questions about where Reis gets any of its data. Why would any landlord, big or small, volunteer this information to a surveyor? PresidoHtsRenter stated that Reis contacts only large apartments. PHRenter – do you know how large and who they are surveying? Many neighborhoods don’t have many (or any) really large buildings – but there are big owners that own multiple buildings of various sizes (Lembi/Citi, Trinity). It would be great if someone could shed some light on Reis’ precise methodology.
Are we really talking about asking rents? A 1 bedroom at 888 OFarreell (Trinity Towers), not a glamorous part of Downtown/Civic Center, is advertised on craigslist at $1,895:
http://sfbay.craigslist.org/sfc/apa/908120416.html
What other large apartment buildings in Downtown/Civic Center might be bringing the average rent to $1,455?
No one pays the craiglist prices. those are asking prices and generally 20% higher than what you can get them for.
Really, Spencer? No one? Er… I am paying the Craiglist rent. Maybe I was just out of practice, after being an owner for 7+ years, but when I found my apartment in Q1 2007, I didn’t really feel that I could negotiate the price.
When there are a group of prospective renters at the first open house on the very day a place was listed on Craigslist, it makes one hesitate to balk at the price. Especially when you’ve already seen a couple of total dogs for the same rent. (And those also had groups of eager prospective renters filling out applications.)
It may be that I was looking in the rental “sweet spot”, just as I am with buying. But I still believe that “No one” is a bit of a stretch. Although given what Tipster showed, perhaps many of today’s asking rents *are* a bit too steep.
OK, “no one” is a stretch, but i believe via personal experience and the experience of friend’s accounts, it is rarere for someone to pay the price listed on CL
Quote….”the vacancy rate in “Haight Ashbury / Western Addition” is almost double that in “Russian Hill / Embarcadero.” Yet the former has seen the big recent increase while the latter fell — makes no sense.”
As a long time resident of the upper Haight-Ashbury I have been following one unpleasant trend for a while now. That is, landlords allowing far larger numbers to co-habitate than in the past. This is the new business plan, with landlords sometimes renting on a room by room basis an apartment they used to wait for a credi-worthy couple to rent it to.
An apartment that has a back porch adjacent to ours was for many years rented by two middle-aged woman professors at SF state. It is a large house-like two floor flat – with views. There are now 8 or more early to mid ’20’s living there, with each day a new adventure for their neighbors. But if something they do really crosses the line, not to worry, because they seem to have 100% turnover every 6 months or so.
I believe that with more layoffs coming to SF, you’ll see more people migrate towards cheaper but still nice areas — the trading down effect.
No longer does being hip living in the Inner Mission justify the high rents there especially if you have either lost your job and are concerned about job security. Folks will have to start doubling up/live with more roomates or move to cheaper areas (which will drive up prices there.)
FSBO wrote:
> PHRenter – do you know how large and who
> they are surveying?
I saw the actual Reis data a few years back and laughed. In most of the country Reis only surveys 100U+ (and in places like Sunnyvale or Elk Grove with tons of comparable 100+ U buildings the data is decent), but in SF they dropped it to 50U and as a result in some areas they had just one building.
> there are big owners that own multiple
> buildings of various sizes (Lembi/Citi,
> Trinity).
Both Lembi/Citi and Sangiacomo/Trinity have a lot of units that they keep at high rents knowing that there is always demand in SF for short term rentals (since it is over $6K a month to put someone up in a decent hotel). There is no reason for any landlord to tell anyone real rents and vacancy info. My family is in the apartment business and if anyone calls we will have just one studio, 1 br and 2 br available and will tell people to come in today before it rents even if we have three of each unit type empty. Ever since CMBS lending became popular servicers do a rent survey every year and it is important to always tell people on the phone that the vacancy rate is low and the rents are increasing or you will get on the “watch list” (and have a servicer crawl up your ass looking for tons of documentation)…
@scurvy,
Your description of north Polk Street is laughable.
It’s hard to know where to begin.
North Polk Street is hands-down one of the most enjoyable places to hang out in SF, at any time of day (excellent brunch at several of the locations). Royal Oak and Nick’s Crispy Tacos are classic SF joints. And the Crunch gym there is awesome.
Where, pray tell, do you live? Mission is great for nightlife, but bad for everyday life. SoMA is fun for ballgames and commuting to the south bay, but way overpriced. Marina is great for food/nightlife if you like the preppy scene, but not good for buyers who know how to spell e-a-r-t-h-q-u-a-k-e.
In short, you’re probably on crack.
Um, Nick’s Crispy Tacos has been around about 3 years and is mediocre at best. Hardly a “classic SF joint.”
North Polk St. is a serviceable neighborhood street. Which is fine, but let’s not get carried away.
As for the rents, I’ve lived on Russian Hill for 20 years. Right now the rents are going in two directions: insanely expensive condos which are fantastic (great kitchens, views, decks, etc)
where the rent is clearly just the carrying cost for an owner that doesn’t want to sell and swallow a loss, or the regular rental stock. For the regular rentals, rents recently climbed but now seem to be drifting down. My guess is that the rents for the regular rentals will steadily drop, while the luxury condos being rented will eventually leave the rental market, because the owners will just bite the bullet and sell (or be forced to sell).
The fact is that there really aren’t easy statistical measures for something as particular as “apartments in Russian Hill” because, as with most real estate, it’s a matter of knowing what it is you’re getting for the price. Right now, rents are on the high side, but there is a lot more coming on the market, and the rents are historically tied to the larger economy, which is only going down.
We rented a place out in the Mission last month and every group that came in told us it was extremely competitive, and the had lost place after place. The best groups and those that had been looking for a while had professional presentations put together — with bios, photos, credit reports, rental histories, and references. One thing to consider about certain neighborhoods (like older housing stock in the Mission) is that many of these buildings are used as 3 or 4 BR, so they get people sharing and paying 1100 to 1200 per month each. These are not people who are in the market to buy — they’re 22 -26 yrs old and making $50 -$70K each. We have piles of applications with mostly well qualified groups. Now maybe it’s changed since September?
“with bios, photos, credit reports, rental histories, and references.”
did you make them promise to feed the squirrels?
We just moved out of the the Noe/Glen Park DMZ to a de-luxe apartment in the inner richmond. Hardly a comparable situation, but I will add these two factoids: Craigslist IS negotiable (and more so if you don’t have pets. That $75 kitty will cost you $200/mo easy), and my old apartment is back on the market for 5% over asking based on what we rented it for in 2006.
“with bios, photos, credit reports, rental histories, and references. ….they get people sharing and paying 1100 to 1200 per month each. These are not people who are in the market to buy — they’re 22 -26 yrs old and making $50 -$70K each.”
It must really stink to be a “price taker” in this market. Too bad they were born a few years too late. In 2004 they could have bought the whole building, no questions asked I’m sure.
“…many of these buildings are used as 3 or 4 BR, so they get people sharing and paying 1100 to 1200 per month each. These are not people who are in the market to buy — they’re 22 -26 yrs old and making $50 -$70K each.”
This is very common in expensive COL cities like NY and SF. Young people can tolerate communal living environments because they’re used to it from college & grad school or because their youth affords them flexibility (they’re not as set in their ways – yet). However, they will be the first to move back home to their parents in Indiana when they lose their jobs and have difficulty finding another after cashing their last unemployment checks. This is exactly what happened after the dot com bust. It really felt like there was a mass exodus out of the city because all of a sudden it was very easy to get cabs and restaurant reservations on Friday & Saturday nights and “For Rent” signs popped up everywhere. Many of the renters who stayed in SF (because they either managed to dodge the pink slip, lived on savings, or were older & more established and financially stable) asked and got rent reductions — sometimes substantial ones. With the prospect of an even greater/deeper recessession and rising unemployment, it’s reasonable to believe that rents will go down.
Maybe no one pays the Craigslist asking price on $4000/mo rentals. I recently did an intense look at 2Br units in Richmond/Seacliff around the $2100 range. There was a steady stream of charmless but acceptable places (i.e. parking, renovated kitchen, smaller building, laundry, top floor) to look at. Two notes: those units weren’t on the market at those prices a year ago (last January there was only dreck available at that price range), and those units dropped off CL within days. At that price renters don’t get to play negotiating games.
Rents are not growing in the inner mission I can tell you that. I have been shopping for lofts in the 3000-3500 range and you can get more for your money now than you could a year ago when I signed my last lease. Rents are negotiable and landlords are calling prospects back asking them if they are still interested (this did not happen a year ago – it has happened twice to me recently). A better loft than the one I am in now can be had for $200 less than what I pay now – and it’s a perfect comp 2 blocks away.
Craigslist ads need to be discounted overall to estimate actual prices paid… probably as much as 10-15% on average I would guess.
It must really stink to be a “price taker” in this market. Too bad they were born a few years too late. In 2004 they could have bought the whole building, no questions asked I’m sure.
No. AS we’ve learned before in this forum Only Mexican migrant workers were able to get the “communal living in San Francisco to multi-unit buyer” type package loans.
fluj, I don’t get your point. “Price takers” in this market are sellers, not buyers.
I read it as price takers being current renters, those who “take” the price they read on Craigslist. To hear Laughing Millionaire tell it, four years ago these people were capable of buying the whole property. I pointed out that the few such packages available in the San Francisco marketplace were solely targeted at migrant workers. As we have learned.
(I don’t want to argue over facetious comments, tho. Do you?)
I’ve noticed a marked lack of ‘for rent’ signs in NOPA / Haight, and was remarking on it to friends recently. We were wondering if people are just hunkering down a bit right now in the downturn.
I don’t see this ‘exodus’ of which you speak.
This time around, the dot com boom / bust is much much smaller as start-ups have 20 people, instead of 200. They might layoff 2 people in this downturn. It just won’t have the same effect as last time.
Of course, the financials are imploding this time, so who knows, maybe we reach a similar critical mass of exodus in a cross-sector recession bonanza.
I haven’t witnessed it yet though.
The start-up’s were smaller in 2000, but there were way more of them.
And they don’t lay off 2 people in the down turn. 99% of those .com start-up’s went out of business.
Very simple way to compare – commute was hell in 2000, significantly better in 2003, then getting more hellish. However, it is nowhere as bad as 2000.
personally, my commute from Pac Hts to South San Francisco takes less time now than it ever has in my 11 yrs in San Francisco.
Maybe more people taking public transport?
maybe because of decreasing population?
maybe increased unemployment?
@spencer,
I agree…for some reason, driving to SSF is way easy these days. The main bottleneck seems to be around 101/92.