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 %|
|2||St Petersburg, FL||1,270||15.5%|
|3||St Louis, MO||970||15.5%|
|9||Des Moines, IA||890||14.1%|
|11||Las Vegas, NV||1,040||11.8%|
|25||El Paso, TX||690||6.2%|
|31||Fort Lauderdale, FL||1,680||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%|
|3||New York, NY||2,550||-15.0%|
|6||San Jose, CA||2,120||-13.5%|
|7||Los Angeles, CA||2,000||-13.0%|
|14||Corpus Christi, TX||820||-8.9%|
|16||Winston Salem, NC||760||-8.4%|
|20||Fort Worth, TX||1,030||-6.4%|
|21||Salt Lake City, UT||1,020||-6.4%|
|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 %|
|6||El Paso, TX||690||6.2%|
|13||Oklahoma City, OK||760||1.3%|
|14||Winston Salem, NC||760||-8.4%|
|16||Baton Rouge, LA||800||0.0%|
|20||Corpus Christi, TX||820||-8.9%|
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%|
|4||San Jose, CA||2,120||-13.5%|
|6||Los Angeles, CA||2,000||-13.0%|
|8||San Diego, CA||1,790||-2.2%|
|10||Fort Lauderdale, FL||1,680||5.0%|
|11||Santa Ana, CA||1,640||1.2%|
|15||Long Beach, CA||1,570||1.3%|
|23||New Orleans, LA||1,430||2.1%|
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%|
|4||San Jose, CA||2,120||-13.5%||2,680||-9.2%|
|6||Los Angeles, CA||2,000||-13.0%||2,780||-14.7%|
|8||San Diego, CA||1,790||-2.2%||2,370||-0.4%|
|10||Fort Lauderdale, FL||1,680||5.0%||2,170||-1.4%|
|11||Santa Ana, CA||1,640||1.2%||2,230||9.3%|
|15||Long Beach, CA||1,570||1.3%||2,040||2.0%|
|23||New Orleans, LA||1,430||2.1%||1,700||9.7%|
|32||St Petersburg, FL||1,270||15.5%||1,670||15.2%|
|47||Virginia Beach, VA||1,080||-2.7%||1,280||4.1%|
|54||Las Vegas, NV||1,040||11.8%||1,250||5.0%|
|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%|
|60||Kansas City, MO||990||4.2%||1,170||9.3%|
|63||St Louis, MO||970||15.5%||1,270||14.4%|
|68||Colorado Springs, CO||940||-5.1%||1,230||1.7%|
|71||San Antonio, TX||900||1.1%||1,130||1.8%|
|74||Des Moines, IA||890||14.1%||950||5.6%|
|81||Corpus Christi, TX||820||-8.9%||1,060||-3.6%|
|85||Baton Rouge, LA||800||0.0%||910||2.2%|
|87||Winston Salem, NC||760||-8.4%||850||-2.3%|
|89||Oklahoma City, OK||760||1.3%||910||0.0%|
|95||El Paso, TX||690||6.2%||840||7.7%|
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