Rental prices drop in Bay Area
The cost of rental housing continues to decline in most Bay Area counties led by San Francisco with a -20.4% drop this October compared to last year.
In the North Bay, Sonoma and Marin counties, average rents declined by 2.9% and 2.5% respectively, according to the most recent reports from private listing websites Apartment Lists and Zumper.
The two notable exceptions to this trend are in Napa County with a more modest decline of -0.1% and in Solano County with a positive uptick of +3.3% year over year.
Other California counties in the South Bay are seeing deeper negative trends in San Mateo County resulting in declines of -12.6%, along with Santa Clara County with a -12.2% drop for those in urban and tech centers such as Silicon Valley, and San Jose in areas with higher costs of living.
Across the country, the Apartment List’s national index shows rents down -1.4% over the past year. Since March, rents have been on a gradual downward slide in 41 of the 100 largest U.S. cities. Seventy of the 100 largest cities are currently registering slower year-over-year rent growth than at this time in 2019.
The reason behind these declines is being attributed to the pandemic, shelter in place regulations and the resulting economic crisis that has made urban living less desirable with the closure of restaurants, movie theaters, and other entertainment and social outlets as well as nearby amenities.
At the same time, more companies are offering employees work at home options and virtual meetings, allowing workers to move to areas with more affordable housing options, enabling them to keep their jobs and enjoy a better standard of living while staying connected to coworkers.
“This outbound trend started in 2017 in the wake of wildfires,” said Ross Liscum, broker associate with the Century 21 Alliance in Santa Rosa with 42 years of real estate experience in the region.
“People are frustrated an angry after four years of smoke and home destruction coupled with COVID-19 business closures and resulting politics. At the same time, developers and investors are not happy about having to deal with housing market restrictions.”
Speaking about the home buying, Liscum said the net effect of this angst is a migration of workers from urban centers and Silicon Valley to the North Bay and other states. In Sonoma County, there are more buyers than sellers. Higher end home sales in the $2-5 million price range are up, including purchases of second homes. As a result, in this price range, local housing inventories have dropped from a 9 to 15-month supply of homes for sale last year to around a 2-month supply this past month.
“Sonoma County has become one of the better valued counties in the Bay Area,” Liscum added, “and we continue to see an influx of house hunters from other states, especially those looking for less dense, congested areas with more property per unit.”
Some of the same short supply issues are seen in the rental market. According to Keith Becker, owner of DeDe’s Rentals, a Sonoma County property management company. He said reports from the 14 largest property management firms in Sonoma County, show the total supply inventory of available rental units is 108 in October, representing a month’s worth of available listings. This total is down from 113 in September, but up from 94 in August and 80 in July.
“While fear of eviction for not being able to pay rent sounds terrible for tenants currently at risk, with California’s AB 3088 Tenant Protection Act, renters have breathing room and are not genuinely at risk, for a few months, if they comply with recent guidelines,” he said.
Assembly Bill 3088 temporarily prevents evictions due to tenants enduring financial hardships related to COVID-19 through January 2021 and delays rental recovery by landlords until March 2021. Others are hoping a more permanent solution can be found.
This legislation only applies to residential tenants and landlords. But no part of this bill forgives or cancels any payment obligations of tenants, according to the October 7, 2020 National Law Review. However, some lawful evictions are permissible under the law:
Landlords cannot evict if a tenant demonstrates a COVID-19 related financial hardships for rental debt accrued between March 1, 2020 and August 31, 2020;
Tenants can be evicted if they fail to provide documentation under penalty of perjury indicating that they cannot pay the demanded amount of rent because of a COVID-19 related hardship;
