Hottest, Most Expensive Rental Markets Unwind
Hottest, Most Expensive Rental Markets Unwind by Wolf Richter for Wolf Street
But apartment rents in 10 other cities surge 10% to 15%.
In the most expensive US markets, apartment rents hit a ceiling some time ago, in some cases four years ago, and have dropped from those highs, as tenants have reached their limit. That this wasn’t a brief fluke, after which rents would surge again in those markets, is becoming increasingly apparent. At the same time, sharp rent increases have moved down to less expensive markets.
In Seattle, the median asking rent for one-bedroom apartments in July fell 3.1% from a year ago to $1,900 and is down 4.5% from the peak in May 2018. The median asking rent for two-bedroom apartments fell 4.1% from a year ago to $2,350, and is down 11.3% from the peak in April 2016.
Clearly, after years of surging rents in Seattle, a ceiling has been hit. At the same time, the phenomenal boom in apartment and condo construction over the past few years has put plenty of supply on the market – though it’s all high-end, and therefore mostly the wrong supply. And those vacant high-end units that need to be filled are putting downward pressure on the entire scale.
In San Francisco, the median asking rent for one-bedroom apartments rose 2.9% in July compared to a year ago, to $3,600. But this was below its old record set nearly four years ago in October 2015 ($3,670). The median asking rent for a two-bedroom apartment ticked up 1.3% year-over-year to $4,790 – also below the October 2015 peak ($5,000).
San Francisco’s are the most ridiculously high rents among large US cities. Locally, it’s considered part of the “Housing Crisis,” which has many aspects, including that 1% of the population is homeless. Despite all the hoopla and the money in San Francisco, rent increases have been smacking into basic market forces starting in late 2015, and those market forces haven’t abated since.
In Los Angeles, the median asking rent for 1-BR apartments fell 4.3% from a year ago to $2,230 and is down nearly 8% from the peak in December last year. 2-BR rents, at $3,190, are down a smidgen from a year ago and down 3.6% from their peak in June 2018.
In San Diego, the median 1-BR rent fell 5.4% from a year ago, to $1,750, and is down 10.3% from the peak in December 2018. And 2-BR rents, at $2,400, are down 4.8% from the peak in October last year. Rents are down similarly in Santa Ana (Orange County) and Long Beach.