The weighted average asking rent for an apartment in San Francisco effectively held at $3,600 a month in the second quarter of 2023, which is one (1) percent higher than at the same time last year but 12 percent lower than prior to the pandemic and 19 percent below its 2015-era peak of nearly $4,500 a month, with the average asking rent for a one-bedroom in San Francisco still holding at around $3,000 per month (which is effectively unchanged on a year-over-year basis, 15 percent lower than prior to the pandemic and 19 percent below peak).
At the same time, the number of apartments listed for rent in San Francisco is now running 20 percent higher than at the same time last year, with over 30 percent more studios and one-bedrooms, with employment having slipped and the cost of capital having jumped.
Our analysis of the rental market in San Francisco is based on over 170,000 data points going back to 2004 that we maintain, normalize and index on a monthly basis, not simply a few years of data or recollections. We’ll keep you posted and plugged-in.
If today’s L.A. Times is to be believed, San Francisco and some other parts of the Bay Area seem to be doing better in terms of balance between wages for the members of the precariat and rents demanded by landlords here than other parts of the country. From earlier today, California counties are the most expensive for renters in the U.S.:
Emphasis mine. $60 an hour is about $124,800 yearly, although people at that level are probably not working a standard 40-hour work week.
If you read the article at the L.A. Times and “hover” over the San Francisco County part of their interactive map it indicates that the mean renter wage here is over $176,000.
Why are the people at the top and slightly to the right-hand side of that bell curve renting? Something to think about for those who think that someone with an income > $160,000 per year aren’t cost-burdened and should be able to afford a mortgage without being concerned they won’t be able to afford other necessities.
And yet there are all kinds of people who somehow survive in CA on modest incomes. I’m reluctant to go up against the LAT – which even in these strained times, no pun intended – presumably commands considerable resources – but I find some of these numbers suspect; do you really believe the mean renter “wage” here is $176,000?
I don’t know whether it’s a typo or there are a dozen asterisks qualifying what’s meant, but I’m going to play the doubting Notcom here (“prove it”) If nothing else I would point out they’re pretty sloppy with terminology: “wage” generally connotes an hourly figure…not an annual income; and while that might seem, and may well turn out to be, nitpicking, it’s also a hint of people not having full knowledge of what they’re talking about.
There’s also the more fundamental issue of (simply) comparing “means”: the average renter can’t afford the average rent: OK, but there are a lot of rents below the average…about half of them, in fact…
While we can argue whether or not the reporter from the L.A. Times got it right in his story, annual income isn’t the same thing as income from wages. I think I’ve mentioned here before that the heiress to the Stroh’s beer fortune, Frances Stroh, lives in S.F.. While she doesn’t rent, she’s a great example of an individual who has a high household income while earning a relatively low “wage” from her ostensible job. Hopefully, the use of “wage” in the story and underlying report would ignore income from non-job sources.
My reading of the story was that in all but San Francisco, Santa Clara and San Mateo counties, the mean wage for California renters was not enough to afford any two-bedroom rental in the respective county, not the average-priced two-bedroom rental in that county. Even if that were not the case, as a simple matter of statistics, it does not mean that about half of rents are below the average. That would be true for the median rent.
Correct: that’s why I said about half.
I believe the process is as simple as one might expect: they take the mean “wage”(or income), figure out how much is available for rent (using one of the common metrics for what people can afford), and then compare it to the mean rent. If the mean is greater than that, then they proclaim “unaffordable”. What percent of the mean they can afford – and more importantly what percentage of units are at that level – isn’t something one could guess without looking at the actual data….but it wouldn’t be zero, unless the rents were in a very narrow range, or the affordability was a very low percent of the mean.
Studies like this – and by ‘like this” I mean how affordable areas are – I believe most commonly say what percent of people can afford the average; intuitively we might think 50% would be an optimal market, but it’s probably a little less than that. Certainly a market where only 10% of people – or whatever small number it actually is – can afford the average seems dysfunctional.
If the LA Times says that the mean renter wage here is $176K, I have no idea what this has to do with my point from a month ago (do you really keep track of old arguments from a month ago? I certainly don’t.).
Someone at that income level might choose to spend their money on buying property, or they might rent and spend their money elsewhere. That’s their decision.
What it has to do with your point from that previous thread is that you were saying:
You seem to believe that someone earning $160k per year should be able to purchase property without being cost burdened, but if it is true that the average renter here earns $176k per year from their job, that is a significant piece of evidence that you are incorrect.
If the report mentioned in the L.A. Times’ article is correct and your opinion that a level of wage income 9.5 percent lower than the mean wage for renters is enough to comfortably purchase property, than we would expect that the home ownership rate in San Francisco would be meaningfully higher than it actually is.
That was not my point at all.
160K/year is enough to cover all necessities. The question is what someone does with. the excess. If someone earns 160K/year, that person may choose to eat out at Michelin restaurants, might join wine clubs, might buy new cars every 5 years, might take expensive international vacations at 5 star resorts, and so on. Many people in San Francisco choose to spend their money on these things and rent instead of buying.
OR, this person might choose to save their money and invest in real estate. This is a choice that people make. I’m not saying one is better or worse. But it is a choice.
Could be a simple explanation — high income renters with years of rent control. Now, did the study check whether they are renters AND owners?