For Bay Area renters struggling to afford apartments that keep getting more expensive, the latest numbers could seem too good to be true — the region’s runaway rent prices finally may be starting to level off.
San Jose is looking at the slowest start to the summer rental season in years. Rents in San Francisco are flat-lining. And Oakland saw a minuscule increase in rent prices last month.
That’s according to a new study by apartment search website RentCafe, which found the Bay Area is part of a nation-wide trend — while rents continue to increase, they’re doing it at a significantly slower pace. Experts say the slowdown suggests that in the near future, renters may finally find relief from the sky-high prices that are forcing people to flee to the Central Valley and beyond in search of cheaper housing.
“Renters are looking at an optimistic start of the rental season,” the RentCafe researchers wrote in the report
The average rent in San Jose last month was $2,692, or 2.1 percent more than at the same time last year, according to the report. That’s the slowest annual growth rate the city has seen since 2011 — a major milestone for a region where prices seemed to be climbing ceaselessly. The average rent in Oakland was $2,617, a 2.5 percent increase from the year before, which marks the second slowest growth rate the city has seen since 2012. The average rent in San Francisco was $3,453, a 0.6 percent increase, and the second-slowest growth rate the city has seen since 2011. San Francisco saw a cooling off last year, when rents actually dropped 3.3 percent from May 2016.
John Protopappas, president and CEO of Oakland-based real estate development company Madison Park Financial Corporation, predicts this is the start of a major slowdown in the Bay Area’s rental market. It’s all about supply and demand, he said. In Oakland alone 7,000 housing units are under construction, and as those finished units flood the market, Protopappas expects the city’s rents to drop 20 or 30 percent in the next two or three years.
“It’s going to become a renter’s market instead of a landlord’s market,” he said.
But the broader Bay Area continues to add more jobs than houses, and until that changes, prices won’t drop enough to have a significant impact on residents, said Mathew Reed, policy manager of SV@Home, an organization dedicated to supporting the creation of affordable housing in Silicon Valley.
Nevertheless, the recent numbers are good news, Reed said. A 2 percent annual increase in rent prices is healthy, as it mirrors the rate of inflation, he said.
Meanwhile, flat-lining rents could impact real estate developers with plans for new buildings. As construction costs continue to rise — some say a whopping 50 percent in the past five years, due largely to a shortage of workers driving up wages for skilled labor — new buildings won’t be erected if rents don’t keep pace with rising costs.
“It will slow down development until we get back to an equilibrium,” Protopappas said. “But it will take years … in the meantime it’s going to be a renter’s market for a long time.”