Exodus from Big Expensive Cities Running out of Steam? Maybe. But Rents in San Francisco & Los Angeles Hit New Multiyear Low

Massive Pandemic Shifts that triggered plunging rents in the most expensive cities and surging rents in cheaper cities still on display.

By Wolf Richter for WOLF STREET.

Has the turmoil in the rental market, triggered by work from anywhere and an exodus from the most expensive cities, settled down? Have rents in those cities hit the bottom of the canyon yet? That’s what everyone wants to know. Rents are not going to zero. At some point they stop dropping, as a majestic churn takes place, with people switching apartments to upgrade for the same rent or maintain the same level of quality for less. This churn is taking place in big cities with sharply dropping rents. High lease activity doesn’t mean people are suddenly coming back. It means tenants are switching apartments for better deals.

In San Francisco, the most expensive rental market in the US, the breath-taking downward spiral, after an uptick in January, ticked down to a new multiyear low in February, according to data from the Zumper National Rent Report: The median one-bedroom rent declined to $2,650, down 24% from a year ago and down 29% from June 2019:

The median two-bedroom asking rent in San Francisco remained at $3,500 in January, down 23.6% from a year ago and down 30% from the peak in October 2015 that, after a big dip, was nearly matched in June 2019.

These rent declines in San Francisco now exceed those during the dotcom bust, when rents plunged over three years – from Q1 2001 through Q1 2004 – to get there, and then spent over a decade in the hole.

In Los Angeles, the 1-BR asking rent dropped further in February, to $1,900, down 16% from a year ago, and down 17% from the peak in October 2019:

In New York City, the median asking rent for 1-BR apartments bounced off the multi-year low in January, to $2,460, but was still down 18% from a year ago, and 19% from July 2019.

But rents for 2-BR apartments in New York City continued to fall, hitting $2,550, down 23% year-over-year – further narrowing the spread between 1-BR and 2-BR rents, which has been going on for several years. The 2-BR asking rent had peaked in March 2016 at $3,980. At the time, the spread was $610. Since then, the 2-BR asking rent plunged by 36%. And the spread is now down to less than $100.

In San Francisco, the spread between 1-BR and 2-BR rents also narrowed, but less so, from $1,300 in October 2015, to $850 now.

“Asking rent” is the advertised rent of a rental apartment, but does not include concessions, such as two months free, which have the effect of reducing the rent, without the reduced rent showing up in the data. “Median” asking rent is the middle asking rent, with half of the asking rents higher and half lower. The data here covers apartment buildings, including apartment towers and new construction, but not single-family houses for rent or condos for rent. Zumper collects this data from around 1 million listings on Multiple Listings Service (MLS) and other listing services, including its own listings, in the 100 largest markets of the US.

Newark, NJ, a relatively small city just across the Hudson River from New York City, ended up being the target for a relatively small number of rent refugees from New York City, but given the small size of Newark’s rental market, rents were upended by the influx, and the median 1-BR asking rent skyrocketed by 52% from July 2019, which catapulted Newark into one of the top ten most expensive rental markets. Newark! The price jumps were clearly overdone, potential tenants lost interest, and a correction was overdue.

So in February, the 1-BR asking rent plunged 7.4% from January, but was still up 20% from a year ago, and 41% from June 2019:

This phenomenon of surging rents in smaller cities that are near large expensive cities has been playing out across the US, as part of the work-from-anywhere shift, where there is no reason to pay the huge rents if you don’t have to commute to work anymore, or have to commute only infrequently. Zumper compiled this comparison of the most expensive cities (chart below), where rents dropped sharply, and their less expensive neighboring cities, where rents shot up.

Note that in the Bay Area, rents are down sharply in the three largest cities (San Francisco, Oakland, and San Jose). But in Sacramento, which is about 1.5 hours by car on a good day from San Francisco, and in Fresno, which is about 2.5 hours by car from San Jose, rents have surged (click to enlarge):

In Seattle, the lonesome uptick in January, after spiraling down for months, was neatly undone in February, with the asking rent for 1-BR apartments dropping back to $1,500, down 16% from a year ago, down 21% from October 2019, and down 25% from the peak in May 2018.

In Boston, the median 1-BR rent, after plunging in January, ticked up in February to $2,050, still down 18% from a year ago and 21% from the peak in December 2019:

The 17 most expensive rental markets.

This list also shows the month and year of peak rent in the shaded area and the decline since then. This is an important figure because in the year-over-year comparisons, the history gets lost, such as the massive declines from their peaks in Chicago and Honolulu, where rents have been bouncing along the bottom of the range for well over a year. Of the 17 cities, 14 experienced double-digit declines in 1-BR rents from their peaks (shaded area):

The 26 Cities where 1-BR rents jumped by 10% or more.

Beyond the most expensive markets with dropping rents, there is another reality: surging rents. Of the 100 largest rental markets, 1-BR rents rose in 72 of them in February, compared to a year earlier. And in 26 of those cities, rents surged year-over-year by 10% or more, topping out at 20%-plus in three cities. These are huge rent increases, a testimony to the distortions going on in the rental market.

But those three biggest jumps, topping at +22.2% in Indianapolis, are down from the year-over-year jumps in January of 31.6% in Newark, 26.8% in Detroit, and 22.3% in Cleveland. But still crazy:

The 26 Cities where 1-BR rents jumped by 10%+ YOY
1 Indianapolis, IN $990 22.2%
2 Durham, NC $1,230 21.8%
3 Newark, NJ $1,620 20.0%
4 Richmond, VA $1,330 19.8%
5 Virginia Beach, VA $1,190 19.0%
6 Boise, ID $1,210 17.5%
7 Spokane, WA $920 16.5%
8 St Petersburg, FL $1,200 15.4%
9 Henderson, NV $1,300 15.0%
10 Providence, RI $1,390 14.9%
11 Cleveland, OH $1,080 14.9%
12 Jacksonville, FL $1,020 14.6%
13 Colorado Springs, CO $1,140 14.0%
14 Tampa, FL $1,250 13.6%
15 Greensboro, NC $840 13.5%
16 St Louis, MO $1,020 13.3%
17 Fresno, CA $1,120 13.1%
18 San Antonio, TX $970 12.8%
19 Milwaukee, WI $1,260 12.5%
20 Kansas City, MO $1,040 11.8%
21 Arlington, TX $950 11.8%
22 Detroit, MI $950 11.8%
23 Mesa, AZ $1,070 11.5%
24 Bakersfield, CA $890 11.3%
25 Sacramento, CA $1,430 10.0%
26 Chattanooga, TN $990 10.0%

The Largest 100 rental markets.

The table below shows the largest 100 rental markets, with 1-BR and 2-BR median asking rents in February, and year-over-year percent changes, in order of the price of 1-BR rents (if your smartphone clips the 6-column table on the right, hold your device in landscape position):

Rents, Top 100 Cities 1-BR $ Y/Y % 2-BR $ Y/Y %
1 San Francisco, CA $2,650 -24.3% $3,500 -23.6%
2 New York, NY $2,460 -18.0% $2,550 -23.2%
3 San Jose, CA $2,180 -11.7% $2,680 -11.3%
4 Boston, MA $2,050 -18.0% $2,500 -13.8%
5 Oakland, CA $2,000 -15.6% $2,500 -13.8%
6 Washington, DC $1,960 -15.9% $2,660 -14.7%
7 Los Angeles, CA $1,900 -15.6% $2,660 -11.3%
8 San Diego, CA $1,820 4.0% $2,400 2.1%
9 Santa Ana, CA $1,700 0.6% $2,370 8.2%
10 Fort Lauderdale, FL $1,700 1.8% $2,190 1.9%
11 Anaheim, CA $1,680 4.3% $2,000 1.0%
12 Newark, NJ $1,620 20.0% $1,820 16.7%
13 Long Beach, CA $1,600 2.6% $2,000 3.6%
14 Miami, FL $1,580 -12.2% $2,000 -14.9%
15 Scottsdale, AZ $1,520 3.4% $2,070 -0.5%
16 Seattle, WA $1,500 -16.2% $1,990 -13.5%
17 Atlanta, GA $1,500 6.4% $1,880 5.0%
18 Honolulu, HI $1,480 -3.9% $1,900 -9.5%
19 Chicago, IL $1,460 0.7% $1,800 5.9%
20 New Orleans, LA $1,450 5.1% $1,700 11.1%
21 Sacramento, CA $1,430 10.0% $1,820 19.7%
22 Denver, CO $1,400 -6.0% $1,920 1.1%
23 Providence, RI $1,390 14.9% $1,710 3.0%
24 Philadelphia, PA $1,390 -4.1% $1,710 3.6%
25 Portland, OR $1,380 0.0% $1,700 6.3%
26 Gilbert, AZ $1,360 7.9% $1,590 7.4%
27 Chandler, AZ $1,330 7.3% $1,560 9.1%
28 Richmond, VA $1,330 19.8% $1,500 11.9%
29 Nashville, TN $1,320 -5.7% $1,450 -0.7%
30 Henderson, NV $1,300 15.0% $1,390 2.2%
31 Minneapolis, MN $1,300 -5.8% $1,800 0.6%
32 Orlando, FL $1,300 3.2% $1,410 0.7%
33 Charlotte, NC $1,280 9.4% $1,520 16.9%
34 Dallas, TX $1,270 4.1% $1,690 1.8%
35 Milwaukee, WI $1,260 12.5% $1,310 12.0%
36 Tampa, FL $1,250 13.6% $1,400 7.7%
37 Plano, TX $1,230 2.5% $1,620 2.5%
38 Durham, NC $1,230 21.8% $1,280 15.3%
39 Boise, ID $1,210 17.5% $1,310 8.3%
40 St Petersburg, FL $1,200 15.4% $1,580 15.3%
41 Austin, TX $1,190 -5.6% $1,540 -0.6%
42 Virginia Beach, VA $1,190 19.0% $1,320 10.0%
43 Baltimore, MD $1,180 -0.8% $1,330 -4.3%
44 Irving, TX $1,140 0.9% $1,460 -1.4%
45 Chesapeake, VA $1,140 2.7% $1,240 2.5%
46 Colorado Springs, CO $1,140 14.0% $1,370 13.2%
47 Aurora, CO $1,130 3.7% $1,500 4.9%
48 Fresno, CA $1,120 13.1% $1,330 14.7%
49 Salt Lake City, UT $1,120 1.8% $1,400 7.7%
50 Houston, TX $1,110 3.7% $1,390 6.9%
51 Fort Worth, TX $1,110 7.8% $1,420 13.6%
52 Madison, WI $1,110 -0.9% $1,410 7.6%
53 Pittsburgh, PA $1,090 -0.9% $1,310 0.0%
54 Cleveland, OH $1,080 14.9% $1,150 15.0%
55 Raleigh, NC $1,080 8.0% $1,270 5.8%
56 Reno, NV $1,070 7.0% $1,470 14.8%
57 Mesa, AZ $1,070 11.5% $1,350 14.4%
58 Buffalo, NY $1,050 -1.9% $1,110 -14.6%
59 Phoenix, AZ $1,050 7.1% $1,290 5.7%
60 Kansas City, MO $1,040 11.8% $1,170 14.7%
61 St Louis, MO $1,020 13.3% $1,280 7.6%
62 Jacksonville, FL $1,020 14.6% $1,200 17.6%
63 Rochester, NY $1,000 3.1% $1,230 10.8%
64 Las Vegas, NV $1,000 5.3% $1,200 3.4%
65 Norfolk, VA $1,000 8.7% $1,110 11.0%
66 Chattanooga, TN $990 10.0% $1,120 12.0%
67 Indianapolis, IN $990 22.2% $1,040 16.9%
68 San Antonio, TX $970 12.8% $1,200 10.1%
69 Anchorage, AK $960 5.5% $1,170 5.4%
70 Arlington, TX $950 11.8% $1,230 11.8%
71 Detroit, MI $950 11.8% $1,130 13.0%
72 Cincinnati, OH $930 3.3% $1,140 3.6%
73 Glendale, AZ $930 8.1% $1,170 9.3%
74 Spokane, WA $920 16.5% $1,190 17.8%
75 Louisville, KY $910 9.6% $1,000 7.5%
76 Bakersfield, CA $890 11.3% $1,110 7.8%
77 Columbus, OH $880 8.6% $1,100 2.8%
78 Corpus Christi, TX $880 4.8% $1,120 6.7%
79 Des Moines, IA $850 -1.2% $900 -1.1%
80 Syracuse, NY $850 1.2% $980 2.1%
81 Greensboro, NC $840 13.5% $940 13.3%
82 Knoxville, TN $830 3.8% $1,020 7.4%
83 Memphis, TN $830 9.2% $880 8.6%
84 Baton Rouge, LA $820 7.9% $950 8.0%
85 Augusta, GA $810 8.0% $910 8.3%
86 Omaha, NE $810 -1.2% $1,000 1.0%
87 Tallahassee, FL $800 -5.9% $910 -2.2%
88 Winston Salem, NC $800 3.9% $890 7.2%
89 Lincoln, NE $790 2.6% $900 0.0%
90 Lexington, KY $780 8.3% $1,000 8.7%
91 Oklahoma City, OK $770 -3.8% $900 -4.3%
92 Albuquerque, NM $750 7.1% $950 10.5%
93 Tucson, AZ $730 7.4% $960 7.9%
94 El Paso, TX $720 9.1% $890 11.3%
95 Laredo, TX $680 -4.2% $970 3.2%
96 Shreveport, LA $650 4.8% $750 7.1%
97 Lubbock, TX $650 3.2% $850 6.3%
98 Tulsa, OK $630 0.0% $840 3.7%
99 Wichita, KS $620 -4.6% $750 7.1%
100 Akron, OH $600 -3.2% $750 2.7%

 

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