Rents Plunge in San Francisco, New York. Other Expensive Cities, College Towns, Texas Oil Patch also Hit. Incentives Surge. But in 18 Cities: Double-Digit YoY Rent Increases

Rents Plunge in San Francisco, New York. Other Expensive Cities, College Towns, Texas Oil Patch also Hit. Incentives Surge. But in 18 Cities: Double-Digit YoY Rent Increases

Big shifts underway — work-from-anywhere, unemployment crisis, oil bust, people searching for a cheaper place to live.

By Wolf Richter for WOLF STREET.

The theme of renters getting out of the most expensive cities is now everywhere. They might retreat to mon and dad’s house to work from home or flee to a cheaper town, or finally buy a house in the suburbs or even out in the country, or whatever. These themes are running around all over the place, often with not a lot of data to back them up at this early stage. But one thing is happening: Rents are dropping like a rock in some of the most expensive cities. And they’re surging in others.

In San Francisco and New York City, rents plunged in August from July at a historic rate, and are now down about 20% from their peaks. Rents dropped in many expensive cities, and in college towns, and in Texas, the largest oil producing state in the US, where the oil bust is amplifying the issues of the Pandemic.

But there are 18 other cities, mostly those that are a lot less expensive, where rents are soaring by the double digits – confirming that there are some big shifts underway.

San Francisco, the most expensive market, skids hard.

The median asking rent for one-bedroom apartments in San Francisco plunged by 5.0% in August from July, to $3,040. This brings the decline since May to nearly 10%, and the 12-month decline to 14.1%, according to data from Zumper’s Rent Report. From the peak in June 2019 – which had passed by a hair the prior record of October 2015 – the median asking rent for 1-BR apartments has plunged 18.3%.

As in so many things, this drop had started before Covid, but Covid is speeding up the process. Homeowners and investors in San Francisco are also trying to get out, and “pent-up supply” has turned into a record glut of homes for sale.

But that 5% month-to-month plunge in 1-BR rents in San Francisco was outdone by Washington DC, where 1-BR rents dropped 5.1% in August from July. And in New York City, 1-BR rents dropped 4.9%.

In San Francisco, the median asking rent for 2-bedroom apartments dropped 3.3% in August from July, to $4,070, bringing the decline since May to 8% and the 12-month decline to 15%. Since the peak in October 2015, the median asking rent for 2-BR apartments has now dropped 18.6%.

Peak-rent in San Francisco occurred in October 2015. Rents then dropped by about 10% over the next 18 months or so before the “Trump bump” fired up the whole situation again, and rents rose. 1-BR rents touched their October 2015 peak in June last year, but 2-BR rents never got close. That “Trump bump” has now been unwound two-fold.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.