The Cities That Finished Last Year With Steep Declines in Rent Prices
Housing in San Francisco. Shutterstock
Data shows rents fell in cities known for high housing costs, and ticked up in some nearby areas and mid-sized markets.
Residential rents were down furthest at the end of last year in a handful of larger coastal cities, as prices climbed in areas on the outskirts of those places and in other mid-sized metro areas.
The trends, outlined in a report the market intelligence firm Yardi Matrix released earlier this month, reflect changes the coronavirus has wrought on the economy. In San Jose, in the heart of Silicon Valley, rents were down 13.7% in December compared to a year before. In San Francisco the decline was 9.4%. In New York City, 11.7%.
Just outside New York City, in Long Island and White Plains, rent prices were up by 3.8% and 2.5% respectively compared to a year earlier.
A similar dynamic played out in California. Rent in the Inland Empire, a region located generally east of Los Angeles was up 7.3%, while in L.A. prices slumped by 3%. About 90 miles northeast of San Francisco, in California's capital, Sacramento, rents had increased by 6.1% in December compared to the prior year.
Changing rental prices offer one clue about the extent to which people are relocating, and where they are moving, as the nation approaches the one-year mark of dealing with the widespread public health and economic fallout from the coronavirus pandemic.
But the long-term effects the virus could have on where Americans choose to live are still far from clear.
The Yardi Matrix report points out that almost half of the top 30 rental markets the firm tracks finished out 2020 with flat or positive year-over-year rent growth. It was the nation's higher-cost rental markets that stood out in terms of declines. And this wasn't limited to cities in New York and California. Seattle's December rents were 6.2% lower than a year before. In Washington, D.C. prices contracted by 4.9%.
Outside of New York and California, the cities with the biggest gains in year-over-year rent prices in December included: Phoenix (4.6%), Tampa (3.9%), Las Vegas (3.8%) and Indianapolis (3.5%).
The Yardi Matrix report highlighted several factors linked to the coronavirus outbreak that could be behind the trends in rental prices.
For one, many people with office jobs are working from home. At the same time, amenities like restaurants and venues have been shuttered or had operations restricted due to virus risks. These changes leave people with fewer incentives to pay hefty city rents.
Meanwhile, the virus has slammed the finances of businesses in sectors like dining, hospitality, live entertainment and tourism. The report notes that workers in those fields, and others facing job losses, may have had no choice but to move from pricey markets.
In general, fewer renters in a market means there is less demand for rental housing, freeing up supply and leading to lower prices.
Even though rents fell in some major cities, it does not mean rents are at bargain levels in those places compared to other parts of the U.S.
An index from the real estate website Zillow, which provides a measure of typical observed market rate rent across a given region, shows rents in the San Francisco region were around $2,900 a month in December. In New York, the price was around $2,500. For the entire U.S., the figure checked in around $1,700.
The full Yardi Matrix report can be found here.
Bill Lucia is a senior reporter for Route Fifty and is based in Olympia, Washington.
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