Apartment Rents Tumble in California Cities

The California apartment market is on a bumpy road to recovery. Currently, most of the major metros in the state are seeing significant decreases in apartment rents. The May report from Apartment Guide has found that San Francisco, Oakland, Los Angeles and San Jose all rank among the top US cities with the biggest fall in one-bedroom rental rates. San Francisco and Los Angeles lead the nation for rent decreases.

One-bedroom apartment rents in San Francisco and Los Angeles are down 18.9% and 18.4%, respectively, the most in the nation. San Jose ranks fifth in the country with one-bedroom rents down 15.3%, and Oakland is eighth with rents down 14.2%.

Affordability seems to play a key role. All of the California cities with falling apartment rents also double as some of the most expensive markets in the country. “While prices in California are decreasing, it is still one of the most expensive areas in the country for renters,” Brian Carberry of Apartment Guide, tells GlobeSt.com. “I think the demand in California for renters has decreased in these areas as people are realizing that more affordable options can be found outside of the major cities or even in neighboring states.”

As for two bedroom rents, only San Jose made the top five for rent decreases, and it was number five. Smaller metros topped this list, including Seattle, Miami, Philadelphia and Lexington. Carberry, however, was quick to note that while these cities didn’t rank at the top of the list, they still saw two-bedroom rents fall. “Local markets are very volatile right now, so in my opinion it’s less important to look at the order in which they are decreasing and just look at the trends,” he says. “The prices in these high-priced areas have been trending down for a while, however, if the rate of decrease is getting smaller, it could be a sign that we’re reaching the bottom of prices. We’ll have to monitor over a few months though to see if this is an outlier.”

Looking at California as two halves, Northern California is struggling more than Southern California. Los Angeles is the only Southern California market to experience significant decreases in apartment rents, but the surrounding markets, even those in the greater L.A. area, like Long Beach, have actually seeing increased rental rates in both the one- and two-bedroom categories. “The exception in Northern California is Sacramento, where prices are on the rise and have been for some time during the pandemic, which could be an indicator of popularity as a more affordable option to the Bay Area rents,” adds Carberry.

Carberry expects that these cities will continue to see a decrease in rents this year. “I believe if we aren’t at rock bottom yet, we will be soon,” he says. “As the economy and states reopen, demand will rise for people looking to live in urban areas compared to how it was during the pandemic. Mix that in with the crazy housing market right now, and you may have more people deciding to rent right now instead of buying. This demand will put pressure on the rental market and we will see prices in certain cities or neighborhoods increase to reflect that.”