Rental prices, fueled by the healthy jobs market, continue to rise in the Bay Area. This past year we have seen rental increases ranging from 10% to 25% on the peninsula. A number of other metropolitan areas across the country are experiencing a similar tight rental market. There is a lot of pent up demand causing pressure on the rental market, and it is very expensive to live here; the affordability index is getting worse.
Rent prices have been steadily rising since 2014 and now a steadily growing portion of monthly income is needed to support the rising cost of rent. Tenants are often paying as much as 50% of their take home income towards the cost of rental housing in the cities with high demand.
The inventory of houses and income properties for sale continues to be very low and consequently purchase prices are up significantly. This in turn puts pressure on the already tight rental market. San Francisco has had about a 15% rise in rents over the past year. 20 of the country’s larger markets have experienced rent increases that far outpace growth in income. Our local rents are high, but so are rents in Seattle, Portland, Denver, Orange County and San Diego. Areas across the nation that are experiencing strong job growth are seeing rental demand exceed available supply and the consequent large increases in rental prices.
Redwood City is adding approximately 3,000 new apartment units. Some are already completed and many more are nearing completion soon. This will help ease the pressure that results from low inventory. Redwood City has also built about 500,000 sq. ft. of new Class A office space to meet the growing demand due to job growth in the area.
Our job market is strong and techies are coming here from all over the nation and world. Typical one bedrooms are renting for $1,900.00 to $2,500.00 or more, two bedrooms $2,800.00 to $3,300.00 or more, and three bedroom $3,500.00+. If you are looking at one of the newly built units, you can add $600.00 to $1000.00 to these prices. One thing that is always certain is that real estate markets are constantly in transition. We feel we are somewhere in the middle of our local rising market, and perhaps may be working our way toward the end of this cycle. The market should stabilize in the near future and become a little less volatile.
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