Unemployment and work-from-home or work-from-anywhere are massively shifting where people want to live.
By Wolf Richter for WOLF STREET.
Apartment rents in 15 of the 100 largest rental markets in the US have shot up between 10% and 16% in October compared to a year ago – all second-tier markets with far lower rents than the most expensive markets. But in the most expensive rental markets, such as San Francisco, New York City, Boston, San Jose, Los Angeles, Washington DC, etc., rents have plunged between 13% and 21% in October year-over-year, which I covered a few days ago.
Of the 100 largest rental markets, 58 experienced increases in the median asking rent for 1-bedroom apartments in October compared to a year ago, ranging from 1.1% in San Antonio, Texas, to 15.6% in Newark, NJ, which is catching some of the crowd getting out of New York City.
Newark’s 15.6% jump took the median asking rent for 1-bedroom apartments to $1,480. This compares to New York City’s median asking rent of $2,550, down 15.0% year-over-year.
This dynamic is playing out in many cities where people can work from home and have to commute to the office only occasionally. And when people no longer need to go to the office at all and can work from anywhere, or have lost their jobs, they can branch further out, to places like St Louis, Missouri, where the median 1-BR rent soared by 15.5% to $970, or Cleveland, Ohio, where it soared by 15.1% to $1,070. If you can save $20,000 a year on rent, why not? OK, you give up the glories that Manhattan, Boston, and San Francisco offer, but that logic appears to be sinking in – forced by circumstances or voluntarily.
The 33 Cities where 1-BR rents jumped 5% or more.
In 33 of the 100 largest rental markets, rents soared by 5% or more in October, compared to a year ago, topping out with Newark (+15.6%). In 15 of these cities, rents jumped by over 10%, huge moves in an expense item that tends to eat up between one-third and well over one-half of the household budget.
In 29 of those cities, the median asking rent for a 1-BR apartment is still less than half of the 1-BR rent in San Francisco ($2,800), despite the increases in those cities and despite the plunge in San Francisco. But the gap is narrowing:
| 33 Cities where 1-BR rents jumped 5%+ | $ | Y/Y % | |
| 1 | Newark, NJ | 1,480 | 15.6% |
| 2 | St Petersburg, FL | 1,270 | 15.5% |
| 3 | St Louis, MO | 970 | 15.5% |
| 4 | Baltimore, MD | 1,280 | 15.3% |
| 5 | Detroit, MI | 760 | 15.2% |
| 6 | Cleveland, OH | 1,070 | 15.1% |
| 7 | Indianapolis, IN | 920 | 15.0% |
| 8 | Fresno, CA | 1,090 | 14.7% |
| 9 | Des Moines, IA | 890 | 14.1% |
| 10 | Chattanooga, TN | 1,020 | 13.3% |
| 11 | Las Vegas, NV | 1,040 | 11.8% |
| 12 | Sacramento, CA | 1,450 | 11.5% |
| 13 | Spokane, WA | 890 | 11.3% |
| 14 | Richmond, VA | 1,190 | 11.2% |
| 15 | Boise, ID | 1,080 | 10.2% |
| 16 | Providence, RI | 1,620 | 9.5% |
| 17 | Chesapeake, VA | 1,240 | 8.8% |
| 18 | Norfolk, VA | 970 | 7.8% |
| 19 | Bakersfield, CA | 830 | 7.8% |
| 20 | Tucson, AZ | 720 | 7.5% |
| 21 | Henderson, NV | 1,210 | 7.1% |
| 22 | Albuquerque, NM | 750 | 7.1% |
| 23 | Jacksonville, FL | 960 | 6.7% |
| 24 | Lincoln, NE | 830 | 6.4% |
| 25 | El Paso, TX | 690 | 6.2% |
| 26 | Glendale, AZ | 920 | 5.7% |
| 27 | Anchorage, AK | 950 | 5.6% |
| 28 | Cincinnati, OH | 950 | 5.6% |
| 29 | Mesa, AZ | 960 | 5.5% |
| 30 | Augusta, GA | 810 | 5.2% |
| 31 | Fort Lauderdale, FL | 1,680 | 5.0% |
| 32 | Scottsdale, AZ | 1,480 | 5.0% |
| 33 | Reno, NV | 1,050 | 5.0% |
The data set was provided by Zumper, which collects them from the Multiple Listings Service (MLS) and other listings, including its own listings, in the 100 largest rental markets. The data set covers apartments in apartment buildings, including new construction, but doesn’t cover single-family houses-for-rent and condos-for-rent.
The rents here are “median asking rents.” “Median” means half of the asking rents are higher in this market, and half are lower. “Asking rent” is the advertised rent, the amount that the landlord wishes to obtain, similar to a price tag on an item in a store. It’s a measure of the current market. But it does not measure what long-term tenants are actually paying in rent, such as under rent control. Asking rents do not include concessions, such as one-month free or two months free, which reduce the effective rent.
In cities such as San Francisco, where asking rents have been in free-fall since April, tenants on existing leases or long-term tenants whose leases have switched to month-to-month will see no rent declines unless they move to a cheaper place, or threaten to and get the landlord to cut the rent, instead of losing a tenant.
The 25 Cities where 1-BR rents fell 5% or more.
This list, the other side of the ledger, includes the most expensive rental markets in the US, but it also includes cities with a relatively high student population that has now thinned out (for example Syracuse), big cities that aren’t expensive but are fairly crowded, some cities involved in the Oil Bust, cities involved in the airplane manufacturing bust (Wichita, KS), and other cities for a variety of reasons:
| 25 cities where rents dropped 5%+ | $ | Y/Y % | |
| 1 | San Francisco, CA | 2,800 | -20.7% |
| 2 | Oakland, CA | 2,020 | -19.2% |
| 3 | New York, NY | 2,550 | -15.0% |
| 4 | Seattle, WA | 1,600 | -14.9% |
| 5 | Washington, DC | 1,960 | -14.8% |
| 6 | San Jose, CA | 2,120 | -13.5% |
| 7 | Los Angeles, CA | 2,000 | -13.0% |
| 8 | Boston, MA | 2,210 | -12.6% |
| 9 | Denver, CO | 1,400 | -12.5% |
| 10 | Irving, TX | 1,000 | -10.7% |
| 11 | Wichita, KS | 600 | -10.4% |
| 12 | Syracuse, NY | 800 | -10.1% |
| 13 | Buffalo, NY | 1,030 | -9.6% |
| 14 | Corpus Christi, TX | 820 | -8.9% |
| 15 | Plano, TX | 1,090 | -8.4% |
| 16 | Winston Salem, NC | 760 | -8.4% |
| 17 | Pittsburgh, PA | 1,110 | -8.3% |
| 18 | Akron, OH | 570 | -8.1% |
| 19 | Milwaukee, WI | 1,040 | -7.1% |
| 20 | Fort Worth, TX | 1,030 | -6.4% |
| 21 | Salt Lake City, UT | 1,020 | -6.4% |
| 22 | Madison, WI | 1,180 | -6.3% |
| 23 | Nashville, TN | 1,270 | -5.9% |
| 24 | Honolulu, HI | 1,520 | -5.6% |
| 25 | Colorado Springs, CO | 940 | -5.1% |
The 25 cities with the lowest 1-BR rents:
The unsung heroes in rental land, so to speak. This is where $1,000 a month gets you a nice 1-BR unit, and where $1,500 may mean a luxury unit where you can live in style. And they include some very nice cities with lots of things to do. And some of them are perfect for working-from-anywhere.
The cheapest city to rent in among the largest 100 rental markets is Akron, OH, where the median asking rent for 1-BR apartments is just $580, roughly one-fifth of what it is in San Francisco. And it fell 8.1% year-over-year. Wichita is right behind at $600 a month, down 10.4% year-over-year:
| Cities with lowest 1-BR rents | $ | Y/Y % | |
| 1 | Akron, OH | 570 | -8.1% |
| 2 | Wichita, KS | 600 | -10.4% |
| 3 | Lubbock, TX | 650 | 3.2% |
| 4 | Shreveport, LA | 650 | 1.6% |
| 5 | Tulsa, OK | 680 | 0.0% |
| 6 | El Paso, TX | 690 | 6.2% |
| 7 | Tucson, AZ | 720 | 7.5% |
| 8 | Lexington, KY | 730 | 2.8% |
| 9 | Albuquerque, NM | 750 | 7.1% |
| 10 | Greensboro, NC | 750 | 2.7% |
| 11 | Detroit, MI | 760 | 15.2% |
| 12 | Laredo, TX | 760 | -3.8% |
| 13 | Oklahoma City, OK | 760 | 1.3% |
| 14 | Winston Salem, NC | 760 | -8.4% |
| 15 | Tallahassee, FL | 790 | -3.7% |
| 16 | Baton Rouge, LA | 800 | 0.0% |
| 17 | Knoxville, TN | 800 | -3.6% |
| 18 | Syracuse, NY | 800 | -10.1% |
| 19 | Augusta, GA | 810 | 5.2% |
| 20 | Corpus Christi, TX | 820 | -8.9% |
| 21 | Bakersfield, CA | 830 | 7.8% |
| 22 | Lincoln, NE | 830 | 6.4% |
| 23 | Omaha, NE | 830 | 3.8% |
| 24 | Memphis, TN | 840 | -1.2% |
| 25 | Columbus, OH | 850 | 3.7% |
The 25 cities with the highest 1-BR rents:
The top seven on this high-dollar list, plus Seattle (#14) and Denver (#24), are the cities where rents have dropped by large amounts in dollar terms, given the high amounts to start with; for example, in San Francisco, the median asking rent has dropped by about $1,000 compared to 16 months ago.
Newark has moved into this list, thanks to its majestic – and for tenants horrifying – rent increases recently. Sacramento, where rents jumped by 11.5% year-over-year, has also moved into this list. It’s on the edge of the San Francisco Bay Area and catches some of the outflux from Silicon Valley, San Francisco, and the East Bay, such as Oakland.
| Cities with highest 1-BR rents | $ | Y/Y % | |
| 1 | San Francisco, CA | 2,800 | -20.7% |
| 2 | New York, NY | 2,550 | -15.0% |
| 3 | Boston, MA | 2,210 | -12.6% |
| 4 | San Jose, CA | 2,120 | -13.5% |
| 5 | Oakland, CA | 2,020 | -19.2% |
| 6 | Los Angeles, CA | 2,000 | -13.0% |
| 7 | Washington, DC | 1,960 | -14.8% |
| 8 | San Diego, CA | 1,790 | -2.2% |
| 9 | Miami, FL | 1,750 | 2.3% |
| 10 | Fort Lauderdale, FL | 1,680 | 5.0% |
| 11 | Santa Ana, CA | 1,640 | 1.2% |
| 12 | Anaheim, CA | 1,620 | -2.4% |
| 13 | Providence, RI | 1,620 | 9.5% |
| 14 | Seattle, WA | 1,600 | -14.9% |
| 15 | Long Beach, CA | 1,570 | 1.3% |
| 16 | Honolulu, HI | 1,520 | -5.6% |
| 17 | Chicago, IL | 1,500 | 3.4% |
| 18 | Philadelphia, PA | 1,490 | -0.7% |
| 19 | Newark, NJ | 1,480 | 15.6% |
| 20 | Scottsdale, AZ | 1,480 | 5.0% |
| 21 | Atlanta, GA | 1,470 | 2.8% |
| 22 | Sacramento, CA | 1,450 | 11.5% |
| 23 | New Orleans, LA | 1,430 | 2.1% |
| 24 | Denver, CO | 1,400 | -12.5% |
| 25 | Portland, OR | 1,400 | -4.8% |
The rental market is liquid and fast-moving, and when rents change a lot, it creates churn. When rents drop sharply, tenants whose leases have expired can go for a cheaper place, or a nicer place for the same rent – the “free upgrade” that is now becoming popular. Landlords react to fill their units, and they underbid each other on rent, or offer better incentives, or nicer units, and it introduces a dynamic of competition.
But when rents are rising, tenants try to hunker down, and when the rent increase hits and they can’t stand it, they’ll have to move to a dumpier place for the same amount (“free downgrade?”).
And when these dynamics are as pronounced as they currently are, with these huge differences in movements, from sharp increases to sharp decreases, it’s also a reflection of people on the move, from the most expensive cities to cheaper locations, either because they can work from anywhere or because they’ve lost their job and cannot afford to live there anymore.
The unemployment factor is big in San Francisco: 76,800 people certified for unemployment benefits in August, according to the latest data from the California Employment Development Department – a huge number for a city the size of San Francisco.
Some of those people made lots of money and have enough wealth and are comfortable not working for a while. But for others, living in the expensive city was nip-and-tuck when they still had a job. When they found themselves on unemployment compensation, there was no reason to blow it all on rent.
In a city like San Francisco, the outflux is the combination of the move to work-from-anywhere and unemployment. Some of the younger recent arrivals may have gone home and moved back in with their parents – and may have exited the rental market altogether.
The Largest 100 rental markets.
The table below shows the top 100 cities, with 1-BR and 2-BR median asking rents in October, and year-over-year changes, in order of the cost of 1-BR rents, from most expensive to least expensive. You can search the list via the search function in your browser (if your smartphone clips this 6-column table on the right, hold your device in landscape position):
| Rents, Top 100 Cities | 1-BR $ | Y/Y % | 2-BR $ | Y/Y % | |
| 1 | San Francisco, CA | 2,800 | -20.7% | 3,690 | -21.0% |
| 2 | New York, NY | 2,550 | -15.0% | 2,900 | -17.1% |
| 3 | Boston, MA | 2,210 | -12.6% | 2,680 | -8.5% |
| 4 | San Jose, CA | 2,120 | -13.5% | 2,680 | -9.2% |
| 5 | Oakland, CA | 2,020 | -19.2% | 2,630 | -12.3% |
| 6 | Los Angeles, CA | 2,000 | -13.0% | 2,780 | -14.7% |
| 7 | Washington, DC | 1,960 | -14.8% | 2,680 | -8.5% |
| 8 | San Diego, CA | 1,790 | -2.2% | 2,370 | -0.4% |
| 9 | Miami, FL | 1,750 | 2.3% | 2,310 | 4.1% |
| 10 | Fort Lauderdale, FL | 1,680 | 5.0% | 2,170 | -1.4% |
| 11 | Santa Ana, CA | 1,640 | 1.2% | 2,230 | 9.3% |
| 12 | Anaheim, CA | 1,620 | -2.4% | 2,000 | -2.9% |
| 13 | Providence, RI | 1,620 | 9.5% | 1,770 | 4.1% |
| 14 | Seattle, WA | 1,600 | -14.9% | 2,100 | -8.7% |
| 15 | Long Beach, CA | 1,570 | 1.3% | 2,040 | 2.0% |
| 16 | Honolulu, HI | 1,520 | -5.6% | 2,160 | -0.5% |
| 17 | Chicago, IL | 1,500 | 3.4% | 1,800 | 1.1% |
| 18 | Philadelphia, PA | 1,490 | -0.7% | 1,750 | 4.2% |
| 19 | Scottsdale, AZ | 1,480 | 5.0% | 2,000 | 1.0% |
| 20 | Newark, NJ | 1,480 | 15.6% | 1,820 | 15.2% |
| 21 | Atlanta, GA | 1,470 | 2.8% | 1,900 | 5.0% |
| 22 | Sacramento, CA | 1,450 | 11.5% | 1,730 | 15.3% |
| 23 | New Orleans, LA | 1,430 | 2.1% | 1,700 | 9.7% |
| 24 | Denver, CO | 1,400 | -12.5% | 1,920 | -3.5% |
| 25 | Portland, OR | 1,400 | -4.8% | 1,800 | 2.9% |
| 26 | Gilbert, AZ | 1,300 | 4.0% | 1,570 | 6.1% |
| 27 | Minneapolis, MN | 1,290 | -1.5% | 1,820 | 1.7% |
| 28 | Chandler, AZ | 1,290 | 4.9% | 1,510 | 8.6% |
| 29 | Austin, TX | 1,280 | 1.6% | 1,590 | 1.3% |
| 30 | Baltimore, MD | 1,280 | 15.3% | 1,610 | 15.0% |
| 31 | Nashville, TN | 1,270 | -5.9% | 1,420 | 1.4% |
| 32 | St Petersburg, FL | 1,270 | 15.5% | 1,670 | 15.2% |
| 33 | Chesapeake, VA | 1,240 | 8.8% | 1,290 | 4.0% |
| 34 | Dallas, TX | 1,230 | 2.5% | 1,650 | 1.9% |
| 35 | Charlotte, NC | 1,220 | 0.0% | 1,430 | 10.0% |
| 36 | Henderson, NV | 1,210 | 7.1% | 1,360 | 2.3% |
| 37 | Orlando, FL | 1,200 | -3.2% | 1,390 | 0.0% |
| 38 | Tampa, FL | 1,190 | 4.4% | 1,400 | 4.5% |
| 39 | Richmond, VA | 1,190 | 11.2% | 1,410 | 7.6% |
| 40 | Madison, WI | 1,180 | -6.3% | 1,410 | 6.0% |
| 41 | Durham, NC | 1,140 | 3.6% | 1,240 | 0.8% |
| 42 | Houston, TX | 1,120 | 3.7% | 1,370 | 5.4% |
| 43 | Pittsburgh, PA | 1,110 | -8.3% | 1,300 | -2.3% |
| 44 | Aurora, CO | 1,100 | 0.0% | 1,440 | 2.9% |
| 45 | Plano, TX | 1,090 | -8.4% | 1,470 | -8.1% |
| 46 | Fresno, CA | 1,090 | 14.7% | 1,320 | 14.8% |
| 47 | Virginia Beach, VA | 1,080 | -2.7% | 1,280 | 4.1% |
| 48 | Boise, ID | 1,080 | 10.2% | 1,180 | -1.7% |
| 49 | Cleveland, OH | 1,070 | 15.1% | 1,160 | 16.0% |
| 50 | Raleigh, NC | 1,060 | 3.9% | 1,230 | 3.4% |
| 51 | Reno, NV | 1,050 | 5.0% | 1,400 | 7.7% |
| 52 | Milwaukee, WI | 1,040 | -7.1% | 1,200 | 2.6% |
| 53 | Phoenix, AZ | 1,040 | 3.0% | 1,280 | 2.4% |
| 54 | Las Vegas, NV | 1,040 | 11.8% | 1,250 | 5.0% |
| 55 | Buffalo, NY | 1,030 | -9.6% | 1,210 | -11.7% |
| 56 | Fort Worth, TX | 1,030 | -6.4% | 1,310 | 1.6% |
| 57 | Salt Lake City, UT | 1,020 | -6.4% | 1,300 | -3.0% |
| 58 | Chattanooga, TN | 1,020 | 13.3% | 1,180 | 14.6% |
| 59 | Irving, TX | 1,000 | -10.7% | 1,360 | -4.9% |
| 60 | Kansas City, MO | 990 | 4.2% | 1,170 | 9.3% |
| 61 | Rochester, NY | 980 | 4.3% | 1,190 | 9.2% |
| 62 | Norfolk, VA | 970 | 7.8% | 1,020 | 8.5% |
| 63 | St Louis, MO | 970 | 15.5% | 1,270 | 14.4% |
| 64 | Mesa, AZ | 960 | 5.5% | 1,200 | 1.7% |
| 65 | Jacksonville, FL | 960 | 6.7% | 1,160 | 9.4% |
| 66 | Anchorage, AK | 950 | 5.6% | 1,200 | 4.3% |
| 67 | Cincinnati, OH | 950 | 5.6% | 1,120 | -13.2% |
| 68 | Colorado Springs, CO | 940 | -5.1% | 1,230 | 1.7% |
| 69 | Glendale, AZ | 920 | 5.7% | 1,170 | 10.4% |
| 70 | Indianapolis, IN | 920 | 15.0% | 1,000 | 9.9% |
| 71 | San Antonio, TX | 900 | 1.1% | 1,130 | 1.8% |
| 72 | Arlington, TX | 890 | -1.1% | 1,180 | 6.3% |
| 73 | Spokane, WA | 890 | 11.3% | 1,120 | 12.0% |
| 74 | Des Moines, IA | 890 | 14.1% | 950 | 5.6% |
| 75 | Louisville, KY | 860 | -4.4% | 960 | -1.0% |
| 76 | Columbus, OH | 850 | 3.7% | 1,130 | 4.6% |
| 77 | Memphis, TN | 840 | -1.2% | 890 | 0.0% |
| 78 | Omaha, NE | 830 | 3.8% | 1,050 | 5.0% |
| 79 | Lincoln, NE | 830 | 6.4% | 940 | -1.1% |
| 80 | Bakersfield, CA | 830 | 7.8% | 1,040 | 15.6% |
| 81 | Corpus Christi, TX | 820 | -8.9% | 1,060 | -3.6% |
| 82 | Augusta, GA | 810 | 5.2% | 880 | 3.5% |
| 83 | Syracuse, NY | 800 | -10.1% | 1,000 | 0.0% |
| 84 | Knoxville, TN | 800 | -3.6% | 950 | 0.0% |
| 85 | Baton Rouge, LA | 800 | 0.0% | 910 | 2.2% |
| 86 | Tallahassee, FL | 790 | -3.7% | 950 | 5.6% |
| 87 | Winston Salem, NC | 760 | -8.4% | 850 | -2.3% |
| 88 | Laredo, TX | 760 | -3.8% | 910 | -4.2% |
| 89 | Oklahoma City, OK | 760 | 1.3% | 910 | 0.0% |
| 90 | Detroit, MI | 760 | 15.2% | 900 | 15.4% |
| 91 | Greensboro, NC | 750 | 2.7% | 860 | 1.2% |
| 92 | Albuquerque, NM | 750 | 7.1% | 940 | 13.3% |
| 93 | Lexington, KY | 730 | 2.8% | 890 | -6.3% |
| 94 | Tucson, AZ | 720 | 7.5% | 940 | 6.8% |
| 95 | El Paso, TX | 690 | 6.2% | 840 | 7.7% |
| 96 | Tulsa, OK | 680 | 0.0% | 830 | 0.0% |
| 97 | Shreveport, LA | 650 | 1.6% | 750 | 7.1% |
| 98 | Lubbock, TX | 650 | 3.2% | 780 | 4.0% |
| 99 | Wichita, KS | 600 | -10.4% | 730 | -3.9% |
| 100 | Akron, OH | 570 | -8.1% | 720 | 2.9% |
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My son is moving out of Manhattan when his lease runs out end of year. He was in a new place that the landowner modified from 2 to 3 bedroom so 3 guys could afford the $6500 rent. He is going to stay with me in my $450 per month shack that really isn’t that much different than his apartment on the inside. It’s a freshly painted box with better views than he had.
He is working virtually and is going to try to bank the $2200/ month to try to get ahead on life. He is teaching for a college virtually and has already gotten orders that it’s all going to be virtual the next semester.
This room cost 6,500 dollars a month.
You can believe it man it’s true.
Somewhere a landlord’s laughing till he wets his pants
Words courtesy of Lou Reed.
Was laughing.
That place is going to empty for quite awhile.
But the alligator has to be paid monthly.
I bought that album when it came out in the mid 80’s and wore the grooves out of it. Strawman was another great song. Thanks for jarring that from the depths of my brain.
My pleasure!
so – if our avg rent for 1 bedroom in Tucson is $720 and my HIGHEST 1 bedroom rate is $525 I have lots of room to raise prices
love it my 15% ROI now going to 50% roi
of course I’m going to price out most of my retirees who live on LESS THAN $1,000 per month
JS,
If I understand you correctly, you a Tucson landlord…and Tucson is a *very* interesting metro because for a *long* time Tucson was able to preserve affordability.
(Infinitely more so than any CA metro, and mysteriously more so than, say, Phoenix).
I think a *lot* of readers on this list would like to hear more about Tucson rental market dynamics.
I’ve done some casual research myself and the only differences I’ve been able to detect are,
1) What seems to be a notably higher percentage of studio apts, pulling the median down (but why can’t/won’t other metros build smaller sf studios?)
2) Tucson has very, very few large public corporations (so less upward wage push on rents?)
Would really like to learn more about metros that managed to preserve affordability over last ZIRP decade.
(Wichita is another interesting story, but very hard hit private aircraft industry there seems to be major explanatory factor).
There is a second dynamic going on here also. When the construction boom started here in Portland ( most other West Coast Cities too) around 2014 many people moved in to staff the construction industry and associated business’s. There was a steady influx of cars with license plates from Texas, Oklahoma etc. Now that most of the building is winding down and there is almost no new construction starting these same people are heading back to where they came from.
Yep, there is an odd sort of bootstraps up/suspenders down feedback effect cycle that goes on in construction.
Old School – excellent!
I have a buddy – his daughter and SIL are moving back home. They bought a home here in Socal but are renting it out and live with parents and save money. The daughter makes $150k and SIL not sure. The parents bought a retirement home on an island in WA and will be back and forth next year, so they benefit from having someone in the home.
One could draw an entropy function from brick and mortar selling continuum to an online one, facilitated by internet and fast data exchanges, and then another one, from office working to wfh, facilitated again by fast data flow. Both these entropic processes result in equalisation of asset values across the board. Property values of course.
I always think, what happens in USA, comes to U.K. in 6-12 months, and spills over to continental Europe, a further 6 to 12 months hence. It would be a great time stamp position if one could establish the above parameters, but at European level, say top 10 cities in U.K., Germany France Spain Italy and others.
Maybe even China or India if such numbers could be cleansed so to be believed.
As specific microcosms, I would also add Luxembourg, Monaco and Lichtenstein (in no particular order) to the list, so to see how entropy affects the very top of the tree.
I don’t think rents in smaller isolated cities like Spokane, WA are rising because of work-from-home. As the article states, people that work-from-home have to visit the office occasionally, so they usually can’t live too far from the city. Spokane is a a 5-6 hour drive from Seattle, so I wouldn’t expect many people employed by a Seattle company to move to Spokane. Also, I don’t think a lot of jobs suddenly popped up in these small isolated cities that would be cause for migration.
I think the small city rent increases are more likely attributable to the rise in housing prices. A lot of people can’t afford housing at today’s artificial prices, so landlords have them bent over a barrel.
I can’t wait for interest rates to normalize, so RE and rents can stabilize at a sustainable price.
BOBBER
Your comment that “…landlords have them bent over a barrell…”
If the landlord had to buy that expensive home, does it not make sense that landlord will need to charge more in rent to cover expenses?
I was a landlord for 15 years (single family stuff) and it was a grind. I am more concerned with the mob mentality that ALL landlords are made of $$$ and it will be OK to leave them hanging out to dry indefinitely (eviction moratoriums). I don’t have the stats, but there is a large continuum of landlords who make a meager living and the mob mentality is likely to make them a Covid Casualty.
The landlords that purchased property five years ago or earlier are making a killing. The landlords that buy property today will be lucky not to lose their shirt. Thus, I would never put landlords in one bucket.
Also, I don’t see too much anger against landlords in particular. People are starting to realize that overall economic policies are rigged against young people and others with no assets. It’s not the landlord that is the problem.
Ha, in my last place I experienced two landlords because the building was sold. Seller was a nice old man who probably bought it for 100k in 1990, sold for $650k a year or so ago. New guys were nice enough people too but awful landlords because they were cheap about everything (and inexperienced).
I think a lack of sympathy for landlords can come from a few different ideological positions. For even the soi dissant socialists you see nowadays this kind of private property is particularly offensive, and a lot of liberals won’t stand for rentiers either. For the numbers-minded, there’s the fact that landlords own the property and can sell the place, making them a lot better off than most! And if not, on account of outrageous debt, they are lousy businessmen and their failure should happen if the system works, in the eyes of conservatives.
I manage 2 properties for same owner
1 he bought over 3 years ago at pretty decent price – cash flowing very well and doing many improvements
2nd one he just purchased this spring with covid in full swing
have 1 deadbeat still behind paying something every month
but he paid top dollar via 1031 exchange
seller jerk who didn’t perform routine maintenance and put in anyone – 1/2 tenants need to be put on street
we’ll see soon enough about your comment, at least buyer has somewhat deep pockets
Moving from New York to Newark:
From one big cesspool to a little cesspool!
I thought the same thing. Newark is probably more dangerous on a personal level too.
Shakeout has yet to factor in.
Dwntwn PDX, w/multiples of new apts/condos coming on line every month (and more in the pipeline), ‘value pricing’ reminiscent of last recession enticements. No major SFR developments w/in a 20 mile of downtown.
Two months free (w/year lease at full sticker) + free cable/parking/garbage is the norm. And nary a taker for those ground level mixed use units.
When construction stops (stationary construction cranes & no crew activity) on those in-process developments, the tsunami is (well) on its way.
As always, ymmv.
Wolf,
One dynamic I don’t think you mentioned in the post, is that the vast majority of inflow metros are much less land starved (by oceans, mountains, protected areas, gvt regulation) than the coastal outflow mkts.
So, while there is currently some movement towards the center by both high cost and lost cost metros, most of the low cost metros can much, much more easily add to their housing stock, hopefully keeping price increases in check.
So while the inflow metros may be seeing some price hikes now, I am hopeful that new supply will be built in 12 to 18 months, returning those metros to much greater affordability.
A lot of those inflow metros are surrounded by hundreds of miles of open space…the area of a circle being pi*radius^2, that is a ton of cheap land within short commuting distances.
The madness of this, is that it has always been true…and the huge coastal premia, long folly.
Cas127,
I can’t speak for the other cities, but there is a huge amount of land in San Francisco that used to be industrial and shipyards and a big power plant and whatnot, and part of it is now contaminated (nuclear from the Cold War). Most of it is now unused. The power plant was shut down years ago.
This includes the entire Treasure Island, the old Naval Shipyards, and the Candlestick Park area. Plus a bunch of other areas in Mission Bay, South of Market, etc. They’re now under development, with something like 60,000 housing units planned for them. But due to the contamination and remediation problems, and a whole bunch of other issues, the whole thing is dragging out forever. But in effect, there is a lot of room to build, even in San Francisco, which is surrounded on three sides by water.
Tearing down old industrial buildings and warehouses and putting up high-rises has been done in the entire South of Market area for the past three or so decades. And there is lots of room left to do this, and they’re still doing it. There is a big construction boom going on in that area. That’s where the brand-new Salesforce tower is.
Same in South Florida; the problem is that the infrastructure (power, water, roads, etc.) is never improved at the same time to the extent that the upgrades are needed.
Wolf,
I’m a very long term apartment landlord looking to bottom fish opportunities. I only know SF from the outside. I’m not a California resident.
Do you have any sense where the bottom of the market is on:
Price Per Unit
Market Rents (1 bedroom/2 bedroom)
Vacancy
Thank you for your thoughts.
LL:
Good question. I have no idea where the bottom is. Last time (post dotcom), it took several years to hit bottom, and without hindsight, it wasn’t obvious when it got there.
There are some big structural shifts happening in SF, and they’re not even clear yet in terms of the data. For example, there was a report on sales tax collections, which showed that, as expected, sales tax collections from brick-and-mortar stores plunged, as people switched further to ecommerce, but it showed that ecommerce sales tax collections only ticked up 1%, rather than 20% or 30% or so, as it did in other places. And this was seen as a sign the people had left the city and were shopping from somewhere else. We don’t have population data yet. But I think this shift needs to play out for a while.
While geography plays a role, government regulations play a bigger role. A few years ago, the San Jose Mercury News noted that the city of Houston issued more residential building permits over the past decade than the entire state of California.
Rents have been dropping in San Francisco but apartment buildings are selling at highest prices ever and there isn’t much product. I don’t get it.
Intelligent yet idiot,
The reason you don’t get it is because it’s not true.
In terms of buildings with 5+ units, in Q3, sales have collapsed by more than 50% (Compass). “The inventory of active listings is up, and the number of sales and the percentage of listings selling are well down since the pandemic struck.”
Wolf:
Any difference in the rentals prices among the multi-storied vs the single floor variety, with the covid 2nd spike on the way?
I don’t know about differences in rents, but what I have heard is that apartment towers, esp. at the luxury end, now have huge vacancy rates, some towers 25%, 30% is what I heard. And that the older small rental buildings that may only have 3-5 units have higher vacancy rates than before, but not terrible high. Towers are just out. That’s what it seems to me. And nearly all of the new towers are high-end — meaning way above median.
Don’t think those will stay empty for too long, nature abhors a vacuum, and those empty buildings are going to get filled sooner or later. The guys who own it will either continue to burn cash paying property tc and whatever HOA and loans they have, sooner or later, they will fold. The only ones who could sustain this are people who couldn’t care less what happens to the property anyway, so they might just dump it for a loss at some point and save themselves the accounting hassles.
But at least the Treasure Island project won’t take off for a while now.
A time will come when a significant part of the population will have survived a COVID infection and thus have acquired immunity.
These people will be in a unique position to profit off the generalized fear of elevators and towers to acquire a nice high-rise apartment on the cheap.
As written elsewhere, nature abhors a vacuum, and given time any will be filled.
You didn’t respond to the poster’s comment. What’s happening with prices?
No big change on a square foot basis, as the market has essentially frozen due to a lack of “meeting of the minds” on prices.
1) SPX jumped like a dog in the morning, but got tired in the afternoon.
2) After resting for x4 days, between Oct 20 to Oct 23, SPX couldn’t
get it up > Oct 19 big red open, turned it’s back and it gave up.
3) Oct 26 low knockout 15 TD lows to the left.
4) Oct 27 was crap.
5) Between Oct 28 big red and Oct 30 SPX was slowing down, shortening it’s thrust.
6) A RSI line on price between Mar 23 low to Oct 28 big red close is
parallel to SPX backbone support line between May 14(L) to June 29(L).
7) A RSI line on the RSI is flat, horizontal. In the next big red, RSI line tilt will be a low slog down..
8) Today SPX jumped above the RSI line to close the gap. Wow !
9) A similar RSI line stopped NDX at today close. !!
10) NDX backbone is parallel to the RSI line.
11) The next RSI line will have a lower angle of attack. Lower and lower.
The fact that Newark, NJ rents jumped is puzzling. It is NOT a nice place to live, and if I lived in Manhattan, I’d hardly escape Covid by moving there. Newark is crowded, amongst other things. In fact I’d rank it as one of the worst places to live in America.
Westchester makes sense as a Covid sanctuary, and even parts of Long Island.
Re Newark spike,
With Fed manipulating interest rates for as long and as severely as they have, pure financial speculation in housing is probably at an all time high (compare limited leverage avl in stock mkt vs housing mkt).
I agree that Newark is pretty unappealing to anyone who lives in the NYC area…but it looks viable on a spreadsheet (sans Google Streetview) and that is all the RE speculators are paying attention to.
The speculators are betting on price convergence (high cost metros fall, low cost ones rise) in a regional context…and not paying enough attention to real world physical characteristics.
Some 25 yr old hedgie analyst is focusing entirely on a subset of numbers, but is too young to have generalized knowledge of Newark’s rep and reality.
Re: Newark Spike
There has been gentrification going on in Newark. My guess is that the distribution of rent is bimodal; thus, median is not a very good statistic.
Trump wins…..slow, controlled, continued, economic decline. Trump’s fault
Harris wins……rapid , chaotic, shit show. Trump’s fault.
There are too many people that can’t afford the current cost of living without going into to debt.
The End
Conversely, you can’t get ahead unless you go into debt. Being weary of a high six figure numbers of debt because of an income in the mid five figure range and stalled there, I am in limbo. I was taught that debt was a good thing, but you have to use it wisely. Now I am being forced to learn that I am just a vehicle for debt to keep this whole shit show afloat.
I don’t remember being taught that debt was a good thing but I do remember in the 80’s as a new college grad (debt free, tuition being $450 a semester) being told that I should take a loan out so I could “establish credit”. At the time I did not really understand this notion but I did follow the advice and took out a small loan that I paid off quickly.
Let’s see, also in the 80’s I had a CD that paid 15% or was it 18%? I heard about “rich people who lived off of their interest”. Having experienced the world of work I thought that sounded like a pretty nice deal and an excellent plan. Being a natural saver, I started saving in my 20’s and fast forward to age 59, have accumulated a significant nest egg. Alas, in 2020 it appears that my goal of “living off the interest” was sadly, a mere pipe dream.
Recently found an old bank statement from Countrywide Bank of all places where I had an account in 2006 paying 5% interest. Wow! Did that really happen? Now the best I can get in a similar account is about .60%. Maybe if I think about it enough my thoughts will become things and the Universe (or The Fed?) will make my dream come true!
In Oz:
The magical land where the central bank (the RBA) cuts the discount rate, goes all in on QE, and China blocks imports of Australian made goods only to see the Australian dollar soar……………well it did until the news about Mr Trump and the election, but on to the topic: rents.
Rents in Melbourne are falling and rents in the other ‘cities’ in the state are increasing. Similar story in New South Wales too.
And prices in those areas outside of Melbourne and Sydney are also increasing with some places up big time: 25% over the past year.
And today our lovely big commercial banks, well at least two of them, cut rates on loans………………sort of……………………
They cut the rates on FIXED loans – one by over 1% and then left variable rate mortgages unchanged.
Of course only those that take out NEW loans will get the reduced rate. With something like 80% or more of all residential RE loans the variable kind, all the RBA did was put more money into the big banks’ pockets.
AS I have posted before those variable rate loans are super cash cows for the big banks and they milk them for every cent to increase profit and to offset losses in other areas.
Just another example of the ‘Australian Tax’ where we pay more for everything than most other countries in the world.
And using one of the big bank’s ad slogans, how can they get away with it?
Because “we can”…………………….
Just a follow up that proves my point about those variable rate mortgages and the profit that Australian banks get from them.
Right now banks are doing it ‘tough’ (HA – banks really never so it tough in Australia) as a result of screw ups such as charging customers for things such as advice never given, money laundering penalties, and businesses going bust, but those home loans are gold.
Today NAB, one of the four big banks announced their latest profit results. The profit fell by 37% to A$3.7 billion for the year. (Yeah only A$3.7 billion.)
Details were:
“NAB’s credit impairment charges increased 201 per cent to $2.76 billion and topped up its COVID-19 impairment provision by $1.5 billion and $388 million for customers working in the hardest hit industries including aviation, tourism, hospitality, retail and commercial property.
Three out of NAB’s four divisions saw cash earnings fall – business, institutional and New Zealand banks –
“however the personal banking arm saw a 9.5 per cent rise in cash earnings due to lower funding costs in the housing lending portfolio.”
Housing lending portfolio = mortgages on houses and mostly the variable kind.
Huge profits for the banks there.
“screw ups such as charging customers for things such as advice never given, money laundering penalties, and businesses going bust, ”
You forgot that they also charge dead people for financial advice.
Another trend to keep an eye on – in central London, I’ve noticed that the small but tidy flats near the financial centre have been selling quite well. Some of the flats I’ve been following have been on the market for nearly a year, but sold this year without big price reductions.
My thinking is that rich folks (bankers) are keen to get a pied-a-tied near work to go with their new country house. I wonder what effect this will have, especially on surplus Airbnb properties, which tend to be the nicer flats in the area. In contrast the rubbish workhouse type properties are not selling at all (or getting tenants).
Yet again, a sign the market is split, and it may end up that the only bargains to be had for the workers will be really horrible ex-rentals that are now slightly more affordable.
1) The RE market try to adjust in response to the virus.
2) The zoomer generation college students emptied the dorms.
3) WFH and the 20% to 100% furloughs changed the character of major
cities RE.
4) Until Dec last year major cities RE commanded high prices, because the 10Y was under 1%. Prices in 2019 were as high as the 2025 and 2030 est prices will be.
5) In 2020 landlords are struggling not to become prisoner of wall street sharks, to avoid the plunge, to provide themselves to the 20% Return On Assets for risk taking of their opponents sharks side.
6) This battle between the landlords and the sharks sent major cities RE value down, well below peak, perhaps to the 5% to 8% ROA, but above Max crap.
7) Boeing 787 park in airports, a do nothing cost center most of this days, supported by CAPEX for winter maintenance and parking fees, to keep value high somehow, below the 2019 peak, but above the crap market of their little brother, the 737 MAX.
8) While the largest cities bleed, many suburbs are celebrating early Thanksgiving. Lower income cities boom and zoom. Upper class retirees are dancing.
9) The RE market became more moderate, above and below both extremes. The high end have been clipped. The smaller cities are moving higher in the value chain.
Seattle is defaulting;
i.e. it’s not providing basic services.
This is only the beginning of the default tsunami.
Meanwhile, on Vancouver Island the RE pressure continues to rise with an astronomical amount of new arrivals affecting prices. I was on the phone last night to a buddy who has done very well in life (RE and investments) and we both agreed that it is now impossible to predict a decline at any particular point. It is maybe and maybe not.
Why impossible? Many Canadians have made new plans regarding heading to sunbelt US for retirement options, including Mexico. Not just Covid, it is also the unrest, violence, inequality, and the sheer number of folks packing guns that evokes unease. Craziness in both rhetoric and politics. Climate change meet the news cycle. In general, disarray; perhaps an unraveling and maybe not, but other Canadians with dollars are moving here (westward) in droves. Locals employed in service of these new arrivals and folks just starting out in life are filling EVERY new apt building before const is even finished! Seriously. There are virtually no vacancies anywhere.
Son just bought a 2nd home ‘in town’, the nearby city of Campbell River of about 50K and 45 minutes from where I live and where he already owns a home that he rents out. The new place is a view home with 3 bedrooms up, and a two bedroom suite in the basement/ground floor. It is in one line of houses up from the waterfront so it has a wonderful view of the ocean and Mainland mountains just 30 miles north. Single family homes are in front so it is unlikely they will be bought up and turned into apts anytime soon as re-zoning and a buy up would have to occur when there are already other large parcels available. Regardless, son will rent the upstairs out and live in the suite until the Covid economy settles down and layoff threat abates. The rent covers the mortgage payment with son needing to make up the insurance costs, etc. Taxes are included in the mortgage payment of $2300/month. Renter will have a lovely 3 bedroom home with 2 bath and a laundry room for this price with the suite dwelling owner away 2 weeks per month. win win.
The mortgage rate is 1.74%!!!!! The term is 20 years. Son is 36 years old.
As long as these rates stay low, RE prices will increase or remain stable, imho. As long as Govt must service their large Covid debts, I don’t see the rates rising any time soon. Maybe one day………
This house price was 600K. The same place in Victoria, with a view?? maybe 2 million+ I have no clue? Vancouver? They don’t exist. Yesterday I went for a walk in shorts. We have a week of sun starting tomorrow. It’s not Phoenix weather Dorothy, but then it’s not Phoenix (if you know what I mean). :-)
RE is still an excellent investment depending on circumstances and location as far as I’m concerned. Location location location must also include a stable economy, civility, and sensible politics. Safety. Healthcare.
regards
Paulo, Canada’s growth is really the colonization of your country by China. If you look at Canada’s trade deficit with China, you can triple that amount because a lot of Chinese product enters other countries form China first before it is “exported” to BC, especially Chinese products that are imported to US, then exported to BC. Have you looked at who is occupying Stanley Park? I remember you from a housing blog site where you were talking the same talk.
Paulo, I wonder why you are so full on about this. Many people here think you must be doing it to pump up house prices. If you really do live there, you are naive. The secret of the game is to keep it secret or you will lose what you claim to love so much. You have no idea of the people you are inviting into your little world. They are not nice people. You will hate them. They will take over your patch and turn it into a nightmare. It will quickly become unaffordable, and you will be priced out by people who will see you as the feral native population. I have seen it happen to dozens of lovely places here in Oz. I wonder if the locals really support your international boosterism.
Regardless of election, a potential area of real estate growth will be re-purposing commercial space into residential products. From shopping malls to office buildings, people will adapt. There’s going to be a massive amount of space that can be developed into new solutions, versus traditional track housing concepts from the 1950’s.
Effectively all lower income “people/households” are being forced down and out to migrate into specific regions. The drop in rents in the high rent districts will ONLY BENEFIT the already SUPER WEALTHY. There will be a decrease in population, stress factors, and will allow the SUPER WEALTHY more spacious occupancy of their already CLAIMED, and GATED communities. This is occurring nationwide.
ACCESS will be further denied, as the boundaries of the gated realms are established and redefined more SPECIFICALLY to focused premier regions for residency in the US.
Transportation routes, and access can be effectively controlled based on the “ruse” of specific levels of health status.