Bay Area Second-Tier Markets Show the Highest Rent Growth

McNellis Partners, Palo Alto, Silicon Valley

By Jacob Bourne

Zumper’s April 2017 San Francisco Bay Area Metro Report, which analyzed rent growth over the past year for 30 of the region’s cities, showed the steepest rental rate gains in the secondary markets of South San Francisco, Petaluma, Hayward, San Leandro, Concord, Santa Rosa and Vallejo. The biggest increases were in South San Francisco, Petaluma, Concord and Vallejo, which all had a year-over-year rent growth of 15 percent. Despite the gains, Vallejo continues to be the Bay Area’s most affordable housing market with an average one-bedroom apartment going for $1,300. Concord, Santa Rosa, Napa and Vallejo were the only cities with rents under the California median.

Conversely, primary core markets generally declined in rent over the past year. The most notable were Redwood City, Palo Alto, Mountain View, Santa Clara and Oakland, with rental declines exceeding 10 percent. Redwood City, the second most expensive city in terms of rent, dropped by 15 percent. San Francisco remained the most expensive rental market in the Bay Area but was marked by an eight-percent decline since last year. San Francisco’s median rent for a one bedroom unit was $3,320 in April. The most salient outlier on the list is Sunnyvale, which rose to the third most expensive market in the rankings. Sunnyvale had a five-percent boost in rental growth to $2,780 for one bedrooms. Median rents in San Mateo, San Jose, Pleasanton and Alameda were level with last year’s rates.

In terms of monthly percent change, Redwood City rents grew by 5.1 percent followed by Walnut Creek and Santa Rosa, both at 5 percent. Sunnyvale came in at a 4.9-percent monthly increase. San Francisco also showed a positive gain of 1.5 percent for one-bedroom monthly rent growth, though that figure was a negative 1.6 percent for the two-bedroom category.

Rent Jungle compiled data showing trends for average rental rates in San Francisco, with growth rankings broken down by neighborhood as well. For April, the average rental price for all bedroom types was $3,703 with one bedrooms going for $3,363 and two bedrooms averaging $4,539. During the six months preceding April, data indicated an average decrease in San Francisco rents by $13 overall. The Financial District had the most expensive average rental rates by a significant amount, according to Rent Jungle’s data.

Despite San Francisco’s rent softening, Zumper’s National Rent Report for May still ranked the city solidly in the lead with a median rent of $3,370 above New York City’s $2,910. San Jose ranked third with $2,260 for May and Oakland at sixth place with $2,060, slipping out of the top five positioning it had previously held. Seattle was the eighth most expensive city for those renting one bedrooms, with a median of $1,850. All of the nation’s top nine were coastal cities excluding Honolulu. According to Zumper’s report, the top ten markets showed more stability than secondary and tertiary markets, which were more prone to either substantial increases or declines. The National Rent Index for one bedrooms increased slightly by 0.5 percent to $1,169.

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