Rebound in S.F. Rents Slows, Still Down Over 20 PercentJuly 23, 2021
Having rebounded a combined 6 percent in May and June, the weighted average asking rent for an apartment in San Francisco has since ticked up around (1) percent to $3,275 per month.
As such, the average asking rent for an apartment in the city is still over 20 percent lower than it was prior to the pandemic having hit and nearly 27 percent below its 2015-era peak, with the average asking rent for studios and one-bedrooms having only rebounded around 4 percent since bottoming in May, versus an average increase of around 9 percent for larger, roommate friendly, units.
And while the implied vacancy rate in the city continues to drop, with 50 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, there are still 40 percent more units listed for rent in the city than there were prior to the pandemic having hit.
Our ongoing 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
Phenomenal for both renters and landlords. Congrats to the lucky renters who got the sweet nectar of rent control the last year. This time reminds me of 2011-2012. The smart money came in because the floor was set. 2009-2010 was lucky risk takers.
The only hedge against inflation for renters is rent control and the only hedge for owners is prop13. We are still in the beginning of the roaring 20’s. Best time to be alive, no better time to make money and babies.
Like America’s Favorite Governor says “California is roaring back” roarrrrrrrrrr. Just wish I was 20 years younger.
Anecdotally, the pandemic netted us a 16% rent reduction plus 10 weeks free and half-priced parking in our Mid-Market apartment tower. We fear the landlord will get greedy again when the time comes to renew.
“Get greedy” yet you trumpet your end of the current bargain. Pot kettle much?
Welcome to planet earth Kyle. You got a great deal, be happy. Many small property owners suffered loses of tens of thousands of dollars last yr from vacancies, that they will not recoup from the government, it will be hopefully be recouped via future rents. Thank goodness for the vaccine that people are returning to the City.
I live in a high rise owned by a large national landlord. As late as August of last year they were still refusing to lower rents as vacancies soared. They were quick to raise prices in the hot market leading up to COVID, but refused for months to move with the market as it turned south. That’s the kind of “have my cake and it eat it too” mentality that I am calling “greedy.”
I think a landlord has the same obligation to lower rents that a worker has to continue to labor with a cut in wages. There should be no obligation.
It isn’t greedy for an employee (or farmer or gas station owner, or plumber etc.) to ask for a raise if the market value of what he/she provides increases. The same is true of a housing provider.
Adam Smith and David Ricardo beg to differ.
Your normative conflation of extractive asset rentierism with productive labor would make a Dickensian villain blush.
Smith and Ricardo, indeed.
One imagines Smith’s and Ricardo’s hilarious reactions to the hodge podge, “Supply + demand and supply side economics works but only for [insert demographic who came in the 80s – early 90s] + [cool artists who came when the city was run down,]
Odd comment. You are apparently unburdened with knowledge of what Smith and Ricardo actually wrote, especially about the rentier class, whom both saw as the chief obstacle to economic growth and improved standards of living. But thanks for the laugh.
Pop quiz for everyone! Who said, “The interest of the landlord is always opposed to the interests of every other class in the community”?
That’s Ricardo, and completely out of the early 19th century agricultural context.
But what would Ricardo make of “cool artists who came here in the early 90s shoud get cheap rent forever and ever” ?
I hadn’t read this in years. Thanks for the refresher.
Actually, the context is how landlords extract the gains to productivity driven by the Industrial Revolution.
“[…] in a progressive country, rent is not only absolutely increasing, but that it is also increasing in its ratio to the capital employed on the land […] The landlord not only obtains a greater produce, but a larger share.” (my emphasis)
As the farmer spends more of his own money on equipment, making the land more productive, the ratio of rent to capital; expenditure grows. Nice work, landlord!
Ricardo’s argument can be extrapolated to landlord/business relationships in general, which is why work from home is such a huge threat to our contemporary urban commercial landlords, and which explains why they are so invested in proclamations of the Restoration™ .
Yeah? says you the old landlord/ tenant farmer who actively produced market goods dynamic can be extrapolated to contemporary passive landlord/tenant scenarios. And anyway, what sort of artist would Ricardo think the most worthy of cheap rent forever, and for their kids forever? Someone who made really, really cool stuff who got here in like ’92 or earlier right?
If you were unhappy with the lease renewal offered by the large national landlord, you were free to try to find cheaper rent elsewhere. If you found your landlord to be “greedy”, move out and don’t do business with that company again. There are well-known pros & cons to living in a rental owned by a corporate landlord vs a mom-and-pop rental.
Also, haighter, mom n pop LLs generally need the cash flow, so their prices are more likely to moderate when demand collapses, as long as 1) they won’t face loan penalties as a consequence of the corresponding reduced property value, and 2) they won’t face mutiny from current tenants wanting similar rent cuts.
OTOH, institutional LLs will sit on vacancies indefinitely with only minimal rent reductions, as we’re seeing all over the place right now, Q.E.D.
oh, won’t somebody PLEASE think of the landlords
Yeah. That comment above about many small property owners suffering loses of tens of thousands of dollars last year from vacancies really tugged at my heartstrings.
There is no such thing as a risk-free business, although many small-time, penny ante property owners operate under the impression that being a landlord in S.F. is a can’t-lose proposition. Welcome to capitalism!
“Welcome to capitalism” but if landlords raise prices when market rents go up they are greedy. Gotcha.
Likewise, why are we not praising the heroic, selfless, valiant landlords who remove their vacant units from a falling market in order to artificially constrict supply?
two beers comment is spot on. I have a SF based landlord company who is holding three vacant units in my building off the market and no doubt it is intended to constrict the supply and keep their prices of other units in the city higher. I had two friends who wanted to move into the building and when I emailed them about the units, there was no response. They don’t want to rent units, they want to push prices higher.
Many other landlords take precisely the opposite approach and are incredibly stressed out and panicked when they cannot rent vacant units. The argument that “landlords hold units off market to drive up rent prices” is not anything anybody can ever back up. Landlords are a diverse group with diverse motivations.
Notice how above I specifically differentiated between small landlords and institutional landlords…
I wasn’t talking to you, Two Beers, but Scotty. I can’t read your takes if they’re longer than a sentence as they’re generally strident, incorrect, and weird. You weigh in on things you don’t know anything about all the time and you’re snide while doing so. The Internet is full of personas like that. Yawn.
Per two beers, supply and demand doesn’t apply to SF. So restricting units from the market doesn’t drive up prices.
The theoretical ideal model of S&D depends on no market actor being large enough to be able to influence the market. All available supply must be brought to market and made available for price discovery, else the model you think explains the universe and all that instead becomes little more than a dumbed-down, simplistic tautology.
But thanks for the snark.
I don’t get how home prices in the Bay Area keep rising yet rent is maintaining the recent decline. I’m in Sunnyvale and the home behind ours, which is identical, just increased asking price from $2M to $2.1M. Meanwhile pay $4k in rent due to the covid decreases. The economics of buying just don’t make sense.
Easy. Purchase prices are up because of cheap money, but nobody borrows to rent.
Because people are exiting cities for suburbs. Central Valley rents and housing prices are soaring.
All asset prices are soaring. The Fed is telling you whatever you do- don’t save. We will punish savers and retirees. Real returns on fixed income is getting more negative. Spend money or buy any asset class. Buy stocks, a house, a second or third house. Buy crazy speculative “assets” because it’s all going up. In doing so, they have removed any notion of risk premia in any of these markets. Buyers feel that they are all bulletproof because in a downturn the Fed will keep doing ever more experimental measures as they have done for the past several crises. Of course, if inflation is not transitory, the Fed loses this magic ability of backstopping markets that has come to be accepted for the last 25 years.
Honestly, even taking into account mix and all that, the specifics of SF appreciation are somewhat disappointing compared to other asset classes or housing anywhere else. And in terms of structural fundamentals, I think SF home buyers are so used to being priced out here that it will take a couple of years for the reality of company moves, part to full time WFH, empty office space etc to sink in in terms of impact.
So go buy some meme stocks. The Fed’s got your back.
No kidding. There’s so much liquidity, it has spillied into useless practical jokes like dogecoin, which people then start taking seriously.
Which brings to mind two beers’ famous maxim regarding digital-crypto garbage: If you’re going to get in on a Ponzi, make sure you’re in on the ground floor and out before it tops off!
It is interesting that suddenly few people are debating whether the local apartment market might be improving, and instead referencing whether capitalism is equitable and what long-dead economists believed. That in itself might signal a turn of the market?
By “signal,” do you mean the 2.5% month-to-month rent drop in SF from June to July, per zumper?
I think if we exclude the opinions of people (who spend an inordinate amount of time on the site trying to belittle the opinions of others, while seemingly also trying to sound erudite), the local apartment could possible have or be close to bottoming out.
As we outlined back in May, Apartment Rents in San Francisco Appear to Have Bottomed. Which brings us back to the data and trend(s) above…
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