New data suggests San Francisco rents are dropping — is it permanent?
San Francisco, Calif., September 22nd, 2017 — Is San Francisco’s rental market cooling down after years of an exceptionally hot housing market?
In the heat of the summer — a typical peak time for the rental market — rents haven’t spiked as analysts would expect. According to Wanderful, as of August 2017, average rent for an apartment in San Francisco is $3532, which is a 3.54% decrease from last year, and a 2.62% decrease from last month. Multi-bedroom apartments account for the majority of the year-over-year decrease.
Is this rent drop caused by an influx of apartment construction?
California’s Department of Finance reported on May 1st, 2017 that San Francisco led the way in housing construction in 2016, adding 5,114 net new units to accommodate the newcomers, almost all of them (5,065) in multi-family buildings. Another report by Paragon suggests that over 8,000 new rental units have been built in the past five years, with at least 10,000 more expected to hit the market in the next five.
As a result of the growth, Adham Sbeih, the CEO of Socotra Capital, tells Wanderful, “The luxury condo and apartment market has softened substantially, as there are at least twenty high rise luxury apartments that have either been built or completely renovated and are now looking for tenants.”
This surge of supply is definitely up. Is it a lack of demand that is contributing to declining rents?
Is new construction overpowering the actual housing demand?
According to BizJournals, from 2014 to 2015, San Francisco added close to 36,000 jobs and only 16,000 of those jobs went to city residents. That leaves 20,000 jobs to near-local or remote workers.
Even though San Francisco rents are dropping, it is still the most expensive market in the country. Neighboring cities, still easily accessible to San Francisco, are less costly. San Jose is the nation’s third most expensive market, while Oakland ranks seventh. It’s likely San Francisco residents are moving East or South to avoid high city prices, and get as much of a bargain as possible in the pricey Bay Area.
Additionally, moving away from the Bay Area, while still keeping a job in San Francisco, is possible. 43% of employed Americans say they spent at least some time working remotely last year, according to a Gallup Poll. The share that reported working four to five days a week, remotely, is nearly 31%.
As the population changes begin to decline, jobs in San Francisco are going to near-local or remote candidates, the number of apartments in San Francisco continues to grow.
What is the future of the rental market in San Francisco?
Will San Francisco build its way out of the rental crisis? Unfortunately, it does not seem likely that the problem will be resolved any time soon.
While data suggests rents are lowering, it most commonly points to the prices of luxury two and three-bedroom apartments. There is still an entire segment of young, single renters looking to land affordable one-bedroom apartments, to no avail. For this type of housing, the supply does not really match the demand.
This is where we step in. Wanderful helps solve the affordable housing crisis by matching interested renters together and securing them a spot in a more affordable two and three-bedroom apartments.
Wanderful finds you a perfect roommate in a variety of ways:
- If you create your Wanderful account through Facebook, we will notify you if your 1st and 2nd degree friends are renting or looking for housing. Moving in with a close connection can feel more comfortable, we get that.
- When you sign up for Wanderful, you have the opportunity to fill out a profile which describes your background, lifestyle and living preferences. Wanderful will match you with potential roommates and make recommendations for accommodations that meet your personal needs.
- You can go to profiles of other Wanderful users to manually find potential matches. You can contact them directly (by email or phone if they’ve provided one).
For more information, or to continue watching changes in the San Francisco housing market, follow Wanderful.