For Bay Area renters, increasing housing costs – as evidenced by the continued growth in the region’s median rent payment – is a major concern. This rise is even more severe for new renters moving into or within the region. Median list rents, the advertised rental prices for available housing units, have increased four times faster than rent payments since the end of the Great Recession. Compared to rent payments, list rents have been higher and more volatile in the Bay Area because they are more responsive to the region’s economic booms and busts and limited supply of new housing. Since the end of the recession, list rents have risen steadily to a median price of over $2,340 and are now on par with inflation-adjusted list rents last seen during the dot-com boom.
List rents data for currently available units sheds light on the cost of housing for new renters. List rents have a direct impact on housing decisions made by new residents moving into, and current residents moving within, a region. Even more than rent payments, list rents are influenced by vacancy rates and housing regulations. High list rents show the financial downside of a move for current renters, and serve as an additional barrier to potential new residents to find housing in connection with new jobs.
The current period of economic growth has resulted in increases in list rents across the Bay Area. Once again, new renters in Silicon Valley and San Francisco have faced rapid price increases. This time, however, Bayside cities in the East Bay such as Oakland, Berkeley and Emeryville have also seen rapid rises in list rents. Oakland has experienced the fastest increase in list rents of all Bay Area cities due to the degree to which job growth shifted towards San Francisco and the preference of the growing workforce for living at the heart of the urban center.
List rents have increased fastest in cities near growing job centers as new workers moving into these cities flood the rental market. During the dot-com boom, list rents in San Francisco, along the Peninsula and in Silicon Valley jumped over 40 percent between 1999 and 2001 in response to rising employment and income before dropping during the subsequent bust. During the same period, list rents in the North Bay and inland portions of the East Bay fluctuated less than 15 percent and have overall been less volatile. List rents in major North Bay cities like Vallejo and Santa Rosa have remained relatively steady during multiple economic cycles.
Rent Prices By Year - 2015
Similar to rent payments, median list rents are higher in the Bay Area than any other major metro area in the United States. This makes the Bay Area the most expensive metro for renters to move to. With rapid job growth that has outpaced the number of vacant units on the rental market since 2010, it is not surprising that rents in the Bay Area have increased faster than any other metro area in recent years. The New York metro area, the second most expensive rental market, has also seen significant – albeit smaller – increases in advertised rental prices.
real Answers (1994-2015)
Zillow: Metro Median Listing Price All Homes (2010-2016)
Image: iStockPhoto (#149060607)
List rents data reflects median rent prices advertised for available apartments rather than median rent payments; more information is available in the indicator definition above. Regional and local geographies rely on data collected by real Answers, a research organization and database publisher specializing in the multifamily housing market. real Answers focuses on collecting longitudinal data for individual rental properties through quarterly surveys. For the Bay Area, their database is comprised of properties with 40 to 3,000+ housing units. Median list prices most likely have an upward bias due to the exclusion of smaller properties. The bias may be most extreme in geographies where large rental properties represent a small portion of the overall rental market. A map of the individual properties surveyed is included in the Local Focus section.
Individual properties surveyed provided lower- and upper-bound ranges for the various types of housing available (studio, 1 bedroom, 2 bedroom, etc.). Median lower- and upper-bound prices are determined across all housing types for the regional and county geographies. The median list price represented in Vital Signs is the average of the median lower- and upper-bound prices for the region, counties, and cities. For simplicity, only the mean list rent is displayed for the individual properties. The metro areas geographies rely upon Zillow data, which is the median price for rentals listed through www.zillow.com during the month. Like the real Answers data, Zillow's median list rents most likely have an upward bias since small properties are underrepresented in Zillow's listings. The Bay Area data used for the metro areas comparison cannot be compared to data used for the regional and local analysis. Due to afore mentioned data limitations, this data is suitable for analyzing the change in list rents over time but not necessarily comparisons of absolute list rents. Metro area boundaries reflect today’s metro area definitions by county for consistency, rather than historical metro area boundaries.
Due to the limited number of rental properties surveyed, city-level data is unavailable for Atherton, Belvedere, Brisbane, Calistoga, Clayton, Cloverdale, Cotati, Fairfax, Half Moon Bay, Healdsburg, Hillsborough, Los Altos Hills, Monte Sereno, Moranga, Oakley, Orinda, Portola Valley, Rio Vista, Ross, San Anselmo, San Carlos, Saratoga, Sebastopol, Windsor, Woodside, and Yountville.
Inflation-adjusted data are presented to illustrate how rents have grown relative to overall price increases; that said, the use of the Consumer Price Index does create some challenges given the fact that housing represents a major chunk of the consumer goods bundle used to calculate CPI. This reflects a methodological tradeoff between precision and accuracy and is a common concern when working with any commodity that is a major component of CPI itself.