The weighted average asking rent for an apartment in San Francisco, including one-off rentals as well as units in larger developments, dropped a little over 5 percent over the past quarter to $4,050 per month.
While an end of year drop is typical, keep in mind that the average asking rent in the city is currently down around 2 percent on a year-over-year basis and 9 percent below its 2015-era peak of around $4,450 per month, with the average asking rent for a one-bedroom having slipped to $3,500 per month (which is around one (1) percent lower than at the same time last year and roughly 4 percent below peak).
At the same time, the weighted average asking rent for an apartment in Oakland held at around $2,925 a month over the past quarter, which is within two (2) percentage points of its peak in the second quarter of 2016 and around 5 percent higher than at the same time last year, with the average asking rent for a one-bedroom currently holding at around $2,500 a month.
As such, the premium for a one-bedroom in San Francisco as compared to Oakland has slipped to 29 percent versus 32 percent at the same time last year and having averaged over 40 percent in 2015, with our trends analysis based on pricing data from over 3,700 past and active apartment listings in San Francisco and Oakland combined and for which the “weighted average” apartment now totals 2.3 bedrooms when counting a studio as having one.
I’m assuming the “weighted averages” are weighted by apartment size – but not age – insofar as “new stock pushes up prices” seems to be a popular narrative here. (And with so much new housing being added here in the higher price ranges – BANG had a chart on this last Sunday – I would think the flattening is even more significant).
“New stock pushes up prices” is indeed true, but is also location dependent. New stock pushes up prices in the neighborhood where it is built, while price pressure is reduced in the most marginal areas first.
Sabbie, I believe the Oakland average is moving up because new units are of a higher quality and in better locations than Oakland’s overall housing stock. I don’t believe a low quality, poorly located unit will increase in value simply because a well located, high-quality unit enters the market…
If a low quality, poorly located unit is suddenly placed in a better location, then its price will increase. How can it be placed in a better location, you ask? Simple, you move the better location to the unit! When you build fancy new buildings in a neighborhood, the location is instantly more desirable, which more than offsets the increased supply. There’s a UCB study on this.
The new housing stock in Oakland will reduce rent pressures on Hayward or Richmond (as an example) since there are always people who were forced to settle for their second choice and are looking to trade up.
In related news, which shouldn’t catch any plugged-in readers by surprise: Babies Kept San Francisco’s Population from Falling in 2019