CFAH

Having bottomed out in May, the weighted average asking rent for an apartment in San Francisco has since ticked up a little over 4 percent to $3,175 per month, but with the average asking rent for studios and one-bedrooms having only ticked up around 2 percent versus a 5 percent increase in the average asking rent for larger units.

That being said, the average asking rent in San Francisco is still 22 percent lower than prior to the pandemic having hit and nearly 29 percent below its 2015-era peak.

And while the implied vacancy rate in the city has dropped, with 40 percent fewer apartments now listed for rent in San Francisco than there were at the beginning of the year, which includes units in larger buildings as well as one-off rentals and shouldn’t have caught any plugged-in readers by surprise, there are still 60 percent more units listed for rent in the city than there were in February of last year.

Our analysis is based on a subset of over 100,000 listings going back going back to 2004 that we maintain, normalize and index on a monthly basis. And as always, we’ll keep you posted and plugged-in.

Comments from Plugged-In Readers

  1. Posted by soccermom

    Seems like supply and demand are at work!

    • Posted by two beers

      Seems like you are conflating “asking rents” with “actual rents.”

      • Posted by soccermom

        How have actual rents performed differently?

        • Posted by two beers

          I guess we’ll see when the first rental inventory is published next year! You must be excited to have so much transparency coming to a sector unfairly stigmatized for its opacity, misrepresentation, back-dealing, and fraud!

          • Posted by soccermom

            Sounds great. Thanks for letting us know.

      • Posted by wilson

        There’s a perennial problem with asking vs actual rent data. It’s just that actual rent net of concession data is somewhat harder to get.

        With inflation spiking, I think real vs nominal values is going to become the relevant issue.

        • Posted by two beers

          Another relevant issue is shadow inventory impeding renter bargaining power. How can there be meaningful price discovery if institutional LLs are willing to sit on overpriced units, or simply pull their units off the market altogether until the coder kids are convinced once again to plunk over half their paychecks for SROs with e-scooter docks, communal foosball, and hot pink Jacobsen chairs?

          I don’t mean to pick on NEMA (ok, I lied), but its website lists only a handful of its 100+ vacant units. Coincidentally, Crescent Heights now wants to convert several hundred units there to intermediate length occupancy (Laura Waxman has the story at SF Business Times). Meanwhile, Greystar has thousands of bespoke vacancies strewn across central SF, but you’d think they’re nearly full if you took their listings at face value. The impending rental inventory that soccermom is so enthusiastic about will even the playing field that to this point has been more like a killing field. As we all learned in Econ 1, symmetrically-distributed information is an assumed condition of the open and fair markets that obtain universally in industrial democracies (/s), while asymmetrical distribution enables sellers to fix prices instead of letting markets determine pricing.

          Asking rent is important data in a market that is rising due to organic economic conditions (i.e., jobs). In a declining market, asking rent sometimes tells a story the real estate industrial complex wants told.

  2. Posted by soccermom

    Many people left San Francisco during the pandemic, which is a decrease in demand. That freed up a great deal of inventory and rental prices dropped +/- 25% if I recall correctly. This drop in price reflects market participants finding a new price “equilibrium.”

    At the same time, cities like Sacramento have experienced a large influx of new people, so both the purchase housing and rental markets have been pushed up dramatically. A craigslist search for an apartment in midtown Sacramento now looks much more like a search for an apartment in San Francisco did 2-3 years ago. Indeed, prices for remodeled apartments in midtown Sacramento are approaching parity with outer San Francisco neighborhoods. This near-equivalence would have been unthinkable five years ago.

    As for large entities holding inventory off-market, that’s certainly possible, but it’s difficult to imagine any kind of market organization (collusion!) that would be sufficient to allow much pricing power by providers. If this were true, rents in San Francisco would not have dropped 25% over the past year, as we have been told repeatedly here that they have. And indeed as any review of market listings on RE web sites would confirm.

    Market forces of supply and demand do work to find equilibria in the housing market. It sometimes takes a macro event (like a pandemic or a financial crisis) to create a change in demand that is sufficient to clear a lot of inventory.

    San Francisco in 2025 won’t look like San Francisco in 2015 but well we knew that all along didn’t we?

    • Posted by two beers

      Why attribute to the conspiracy bogeyman what can be more easily explained by rational self-interest? You might think LLs hold secret candle-lit black masses in the basement of the SFAA where the Lords of Property convene and hatch their plots against the rabble, but isn’t it more likely that most LLs familiar with a calculator and spreadsheet can figure out what’s best for their bottom line?

      Cash-flow isn’t a LLs only only concern, and there are different factors influencing a LL’s price floor.
      LLs know if they undercut their current tenants, there will be hell to (not) pay.
      LLs know that constraining supply will slow downward pressure on rents.
      LLs with mortgages know that lowering rates could trigger loan penalties or defaults.
      If LLs were as ignorant as you imply, it’s a wonder any of them can stay in business!

      “If this were true, rents in San Francisco would not have dropped 25%”. If the thousands of units currently vacant were dumped on the market, your “market forces” would have pushed prices lower, probably much lower.

      Or do you deny that there are thousands of empty units currently left off the market?
      Do you deny that most LLs have price floors that prevent market-clearing price discovery?

      Relying solely on S&D models to explain markets while ignoring other factors — like price, pricing power, income, jobs, interest rates, fear, greed, instinct, peer pressure, outlook, speculation, security, savings, information symmetry, concessions, substitution, mobility, age, et al — leads to a very incomplete and simplistic understanding of price movement. The good men and women of the real estate industrial complex know all this, of course (they have to- it’s their bread and butter), they just don’t want their customers to know.

      But even assuming S&D by itself satisfactorily explained market pricing, your own appeal to S&D explains what motivates LLs to keep vacant units off the market,

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