As “Hire Spreads” Shrink, Will Exodus Finish? Rents in San Francisco, Silicon Valley at Multiyear Lows, however Soar in Sacramento, Fresno, Lake Tahoe Space
When is the move not worth the savings? But wait … the exodus for the Sierra Nevada is not savings-driven.
By Wolf Richter for WOLF STREET.
People’s response to the changing work environment during the pandemic, particularly the sudden explosion in unemployment and the conversion of large corporations and government agencies to working from home, has left the housing market in complete turmoil as people see large, expensive city centers leave and move to distant places or just further afield to smaller towns or mountains. This can be seen in falling rents in these expensive cities and rising rents in the moving areas. This is exactly the scenario in the San Francisco Bay Area where rents have shifted massively.
In San Francisco, the most expensive rental market in the US, the median asking rents for one-bedroom apartments remained at the multi-year low of $ 2,650, a 29% decrease from June 2019, according to Zumper:
What everyone wants to know: 12 months after the pandemic, has this step gone as far as it will go? And will something or all be reversed when people come to their senses and move back or whatever? There was intense speculation and feverish hopes at every turn.
In Silicon Valley… In San Jose, the third most expensive major rental market in the US, the median asking rents for a 1 BR apartment fell 3.7% in March from February to $ 2,100, a decrease of 18% from the high in July 2018 corresponds to. In San Mateo County, 1-BR rentals were down 19% year over year.
In OaklandThe median asking rents fell 3.5% in March from February to USD 1,930, a decrease of 23% from the high in October 2019.
“Offer rent” is the advertised rent, but does not include any discounts, e.g. B. two months free of charge. The “middle” asking rent is in the middle: half of the asking rents are higher and half are lower. Zumper’s data relate to apartment buildings and new buildings, but not to single-family homes for rent or condominiums for rent. Zumper collects this data from around 1 million entries in the Multiple Listings Service (MLS) and other listing services, including its own entries.
But in SacramentoThe median asking rents for 1-BR apartments has risen by 9.2% year-on-year and by 12.7% since July 2019 to USD 1,420. The city is on the edge of the Bay Area, about a 90-minute drive from San Francisco on a good day.
In FresnoThe median asking rent has risen by 18% since July 2019. The city is located in the San Joaquin Valley, a primary agricultural region in California. It’s a three hour drive to San Francisco. But it’s close to Yosemite National Park, Kings Canyon National Park (only 1 hour), and the mountain. Whitney and other miracles.
When does the shrinking difference no longer justify the move? This is a question many people ask themselves when they move to a city like Sacramento or Fresno.
And these “rent spreads” have shrunk massively. The difference in 1-BR rents between San Francisco and Sacramento has halved since July 2019: In San Francisco, rents fell from USD 3,720 to USD 2,650 in the reporting period. In Sacramento, rent rose from $ 1,260 to $ 1,420. The difference between the two cities decreased from $ 2,720 in July 2019 to $ 1,230 now. And the rental range between San Francisco and Fresno has decreased 46% from $ 2,720 to $ 1,470:
But people have other reasons to move … a passion. If you only have to show up at the office occasionally, you can move to where you really want, even if it doesn’t save a lot of money or money.
In Placer County, The median asking rents for a 1-BR apartment rose by 30% year-on-year. The county stretches from Sacramento over the foothills into the Sierra Nevada to Truckee, the northern part of Lake Tahoe and the state line of Nevada. It includes cross-country and downhill areas.
This has become a brand new moving area for people in Silicon Valley and San Francisco. People go skiing for a couple of hours and then return to their Zoom meetings and coding with big smiles. It’s hard to beat as a work environment.
In El Dorado CountyThe median asking rents rose by 20% year-on-year. The county is south of Placer County and stretches from Sacramento over the foothills in the Sierra Nevada to the southern part of Lake Tahoe and up to the state line of Nevada. Ski areas in winter, wonderful hiking areas such as Desolation Wilderness in summer.
People who work from home have the freedom to live where they want to live, either to be able to exercise a passion or to save a lot of money on housing – or both! And they all calculate and struggle with their own equations, unless it is an impulse decision to be challenged by reality in a short period of time, and that too happens.
But at some point, when the price differential narrows, the equation changes and decisions change. And every landlord in San Francisco and Silicon Valley is now looking for signs that people are coming to their senses and heading back to the big big cities or whatever. And by the summer, some employers may require some of their employees to be in the office four or five days a week. For now, however, the rental data shows that the exodus has not reversed.
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