New Report: Bay Area at Forefront of a National ‘Rental Crisis’
There’s no doubt that Bay Area home prices have been climbing steadily since the recession, but as it turns out rental housing costs are going up even faster and it is creating what Zillow calls a national rental crisis.
Rents all across the country are going up faster than home prices, and they’re going up in our region faster than anywhere in the U.S., Zillow reported in its latest rent index.
In the five-county San Francisco metropolitan area, the Zillow Rent Index soared to $3,162, up 14.9 percent in April from a year ago, the fastest increase in the nation. And who was number two? The San Jose metro area, where the Zillow Rent Index rose to $3,287, up 12.9 percent.
Denver, Kansas City and Portland rounded out the top five rental markets with the greatest price increases. Nationally, the Zillow Rent Index rose 4 percent in April from a year ago to $1,364. The rent index is the median monthly rent “Zestimate” of all properties in a region, not just those for rent.
While home prices have moved up and down over the past decade, Zillow said that rents have been rising steadily during that time. In April, rent increases nationally outpaced home-price appreciation for the first time in years, accelerating what Zillow called a “rental crisis.”
In the San Francisco metro area, rents started rising faster than home values in July 2014, according to the report, and they have been growing faster ever since on an annual basis.
The report added that a slowdown in home-price appreciation will help renters looking to buy a home in much of the nation.
Here are Zillow’s Top Five Metro Areas in the U.S. for Rent Increases:
Below is a market-by-market report from our local San Francisco Bay Area offices:
North Bay – The market is still humming along with multiple offers on fairly priced properties, according to our Greenbrae manager. We are seeing properties sitting when sellers have inflated views as to the value of their property. Contingent free and all cash make up a majority of the offers in Marin right now. Novato has experienced a nice surge of increased sales activity over the past few weeks. There have been fewer multiple offers, sometimes with just one strong offer and sometimes no offers on the offer date. Some buyers are waiting to see if the home gets multiple offers because they don’t wish to compete. Higher priced homes in the $1m-$2m range are selling more quickly in Novato. The scarcity of homes in the county and higher prices in neighborhoods to the south are factors driving buyers north to Novato. Our San Rafael manager says it appears that new sales are starting to ease up probably due to the past holiday weekend and the “end of school” time of year. It does not seem as active as it had been during the February thru mid-May market. He expects the market will continue to be a balanced to slight sellers’ market throughout the summer selling season. It’s more of the same story in the Santa Rosa area – few listings and many frustrated buyers. Continued upward pressure on values in all price points. Previews market is very strong, competitive for buyers much like the lower price points. There have been a high percentage of cash transactions and relatively quick closings. Our Sebastopol office continues to list and or sell a Previews property almost weekly. Attendance at open houses remains strong, however agents did report a decline over the Memorial Day holiday. The overall market in Southern Marin is driven by luxury sales, so prices are appreciating and unit sales are slightly off. We continue to be restricted by low inventory. The Previews market remains active as evidenced by 3 closings this week for over $4 million for CB-Southern Marin. Also this week, we have received offers on listings we have for $5.9 million and $6.9 million. Almost half of our luxury sales never go on MLS.
San Francisco – A quiet Holiday week, reports our Lombard office manager. Again a wide gamut from solo offers to over 30 offers on a fixer upper – a property type that seems to bring the most traffic, interest and offers. Inventory is staying stubbornly low. Our Market Street office manager says whether it’s Memorial Day or the approaching summer season, there seems to be a subtle shift in the market going on. While most sellers are still seeing multiple offers on their offer dates, the number has dropped from double digits to just 2 to 4 this period. The arrival of summer tends to signal a slowing of the market in San Francisco. Only time will tell if this pattern holds true, or will be ignored by the frustrated buyers still eager to own a home.
SF Peninsula – Multiple offers continue as we approach the end of school and graduation season, our Burlingame manager reports. Typically, activity will fall off at this time as summer vacations begin. This year doesn’t seem to be slowing down and ready buyers are waiting for each new listing that comes on the market. We hear of open houses with 200+ attendees. Several properties in the last few weeks have seen overbids of $400-500k. Hillsborough has some beautiful new listings coming on the market in the $4 million to $7 million range. Entry-level buyers can expect to pay $3 million for a home that needs work. There are some great opportunities in prime lower Hillsborough right now. Our Burlingame North manager says the number of ratified sales from May 1 – May 27 reported in the MLS in San Mateo County is down from the same period in 2014. In 2015 there are 537 ratified sales compared to 581 in 2014. Could be influenced by the continuing very low number of homes coming on the market. In the Menlo Park area, not bad open houses for Memorial Day week. Our Redwood City-San Carlos manager says there slowly seems to be more inventory coming on the market. Open houses are still very busy and very few properties are going at list price.
East Bay – The last few weeks our Berkeley office has seen a few off market sales. It is still very competitive and open houses are heavily attended with at least 100+ people. Many properties under $1 million are seeing record price per sq ft sales. One of our agents set a new high for Berkeley, with a sold price of $1083/per sq ft. Another agent closed on a property that received 28 offers and sold for 58% over asking. The luxury end of the market still has very low inventory. Things have slowed up a bit in the Oakland-Piedmont area, and agents are not sure if it is because of the holiday or there is a chill in the air. A couple of homes are having a third open house and the number of multiple offers in some instances is down.
Silicon Valley – Our Cupertino manager senses a definite shift in the market. Not all sellers are getting their dream prices, and they need to re-evaluate. Jump in there, buyers! In the Los Gatos area, buyers get a reprieve as more inventory hits the market. Inventory in the San Jose Almaden area has pretty much reached last year’s number at 52 available (54 last year for May), while pending homes are actually up by 10 with a total of 50 for this year. Blossom Valley has had a huge jump in pending sales with 125, compared to last year at this time with only 72 pending sales. Actives are down 20 with a total of 68 available compared to 88 in May of 2014. Actives in Cambrian are at 56 compared to 68 last year for May, yet the homes that are pending are up 10 for a total of 77. The local Willow Glen market has finally had an influx of new active listing inventory, reaching a high of 67 units – a high water mark of active listing inventory for 2015. With the increase of listing inventory our office had its first week of more buy side transactions then selling our own listings. The Memorial Day holiday weekend has officially kicked off the summer selling season in Willow Glen. Sunnyvale continues to defy the odds and reason, our Saratoga manager says. Buyers have and continue to migrate down the peninsula as they become priced out of those markets. They find Sunnyvale as reasonable commute location. Although the number of offers has decreased on the homes (from 10 to 5) the over list price offers have not. Recently one average Eichler home sold for $300K over list with 5 offers. This home would have sold a year ago for $300 less. There has been a recent surge in luxury homes on the market in the $4 million + range. Perhaps some sellers now feeling they can get the number they were hoping for. But buyers in this range in Saratoga can afford to be choosy. If the home is exceptional, it can and will sell quickly, otherwise it becomes another over priced home on the market.
South County – Inventory is looking better as more sellers are realizing that they can obtain “top dollar” for their homes. An interesting phenomenon, however, is that many sellers are only accepting offers if they can, in fact, find a replacement property. This “reverse” contingency (on the part of the sellers) is a very common thread in many of our contracts. In addition, as prices continue to rise, obtaining an appraisal at the fully negotiated sales prices is often times problematic. Appraisers are having a difficult time finding comparable sales to support increased property values. At this point, the supply of homes still cannot meet buyer demand, and so this trend is expected to continue for some time.