Rental Rates Indicate Californians Moving Back to Cities

A car drives by a building advertising apartment leases in San Francisco on Sept. 1, 2020. (Justin Sullivan/Getty Images)

Commentary

Rents in urban centers are increasing as rents in the suburbs fall, indicating that tenants could be moving back to large cities.

Rents for a one-bedroom apartment in San Francisco were up 5.3 percent from May to June.

According to Zumper’s National Rent Report, “People are returning to the city in preparation for office reopenings. This is pushing rent higher, and the rate of [rent increases] accelerated once again in June.

“On a quarterly basis, it’s clear that the Bay Area has turned the corner. After four quarters of sharp drops in rent, each of its three major cities [SF, San Jose, and Oakland] saw rents rise in Q2 of 2021 compared to Q1, including a 5.3 percent increase for San Francisco. With life in the Bay Area getting back to ‘normal,’ there is no reason to think this won’t continue in the near-term.”

At the same time, rents for one- and two-bedroom apartments in Los Angeles were up a respective 1.5 percent and 3 percent from May to June even as one-bedroom apartment rents in suburban Santa Ana, Anaheim, and Long Beach decreased for the month.

Two-bedroom rents increased in Anaheim and Long Beach, but this might be a function of Disneyland re-opening and the Ports of Long Beach and San Pedro being so busy.

Rents in California’s second-largest city, San Diego, continue to climb. Rent for a two-bedroom apartment was up 1.6 percent from the month before. A two-bedroom apartment is now 10.4 percent more expensive than it was a year ago.

In the Central Valley, rents for single-bedroom apartments declined during the month while rents for two-bedroom apartments increased.

This may indicate less demand from single-person households for places to live in Fresno and Bakersfield as they look back to more urban environments. Rents in both cities are still substantially higher than they were a year ago. The increased rent for two-bedroom apartments may indicate increased wealth due to the hot labor market and the recent stimulus money.

If the public health situation remains positive, it seems the pandemic-era trend of people moving away from cities may reverse.

Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.