Santa Clara and San Mateo County Rental Trends
February 8, 2017
While rent growth in 2016 began with a BANG, it fizzled to a whimper by the end of the year. Today, it’s common for renters to pay half or more of their monthly income on rent, especially in California’s coastal, urban areas like the Bay Area and Los Angeles. The pace of increase has slowed in 2016, giving renters a desperately needed break, much to the chagrin of landlords. As of October 2016, rents have increased over the past year by 2.7% in San Jose and 2.6% in San Francisco and The Peninsula according to Zillow’s rental index. Though it is true that the annual pace of increase across California is still higher than the national average (1.7% as of Oct. 2016) this reductive year-over-year figure doesn’t reflect the fact that rents in some of these metros have actually decreased in recent months. This has been especially true in the Downtown San Jose Market where asking rents have declined $100 – $200 per unit depending on type and location. Contrast this relatively placid growth with just last year, where the annual change in rents was much higher, boasting an 11% annual increase in San Jose and more than a 12% annual increase in San Francisco and The Peninsula. Landlords take heart, however. In 2017 economists predict that California will continue to dominate the list of rent-growth leaders for the coming year, with many areas still considered top rental markets. Oakland tops the list, with San Francisco and San Jose still in the top 10 despite these later areas experiencing rent cuts. This is due in part to oversupply in these markets, as well as the local economy experiencing a notable recent decline. But fear not, job-addition volumes are still substantial. “[Apartment operators] will pretty quickly realize that the [Bay Area] market hasn’t gone off the edge of the cliff, regaining some confidence on pricing power,” says Greg Willett of MPF Research. So it appears that while rent growth in 2017 will not quite match the fireworks of New Years’, they will probably reflect that of a more normal rental growth period.