California Rents Decline Amid National Surge; Major Cities Buck Trend
By Michael Lucarelli July 29, 2024 3:35 pm
reprints
As rental prices across the United States continue to rise, California’s largest cities are experiencing a unique trend that sets them apart from the national landscape. While the national rent index for one- and two-bedroom units increased by 1.2 percent in May 2024, several major California cities have seen a decline in rental rates, according to Zumper’s recent National Rent Report.
Declining rents in major California cities
Seven out of 11 major California cities reported negative annual rent rates for one-bedroom units, according to the report that analyzed data from about 1 million active listings across 100 cities. These declining markets are among the top 20 percent in terms of price and population. Oakland and Sacramento saw the most significant drops, with rental rates falling by 9.1 percent and 8.1 percent, respectively. Other cities such as Los Angeles, San Jose, San Francisco, San Diego and Long Beach also saw declines, albeit to a lesser extent.
The primary driver behind these falling rental prices is not an increase in housing supply but a decrease in demand, according to the report. The Bay Area and Los Angeles have witnessed substantial population outflows and job losses in recent years, and both cities have yet to fully recover. Additionally, California recorded the highest unemployment rate among all states in April 2024, further contributing to the reduced demand for rental units.
The recent softening of the rental market in California can result in some benefits for those renters committed to staying in the state. As rental prices decline, those leasing their homes might be able to move into more desirable areas that were previously out of reach.
Additionally, in a softening rental landscape, landlords tend to commit to improving their properties with more competitive amenities to attract and retain tenants.
Last, the decreased demand can also encourage property owners to negotiate lease terms more favorably, offering incentives such as reduced security deposits, flexible lease durations, or rent-free periods. For those renters looking to move to California or relocate within the state, the current market can present some worthwhile opportunities.
National rental market trends
In contrast to California, most other states are continuing to see rent appreciation. Cities like Syracuse, N.Y., and Columbus, Ohio, saw the fastest-growing rents nationwide, with annual increases exceeding 20 percent. Rising rents in those cities have been fueled by factors such as population growth and expanding employment opportunities. Nationally, the rental market remains competitive, with a competitiveness score of 73.4 out of 100 at the start of the moving season and nearly two-thirds of U.S. renters renewing their leases.
Miami retains its position as the nation’s most competitive rental market, driven by strong job prospects and a generally desirable lifestyle. Suburban Chicago has risen to become the second-most competitive market, influenced by the growing trend of “hipsturbia,” where walkable suburbs blend urban perks with suburban affordability.
Regional variations and market dynamics
The supply-limited Northeast dominates the small markets ranking, with Lehigh Valley, Pa., leading the charge. Minnesota’s Twin Cities and Memphis, Tenn., have also seen significant increases in rental competition year-over-year, and New York City boroughs are also seeing a surge in demand for rental apartments.
Bucking overarching rental market trends, California’s divergence from the national direction underscores the regional nature of the housing landscape. While cities across the U.S. grapple with rising rents and heightened competition, California’s largest cities are experiencing a temporary cooling effect driven by decreased demand. Yet, given the state’s enduring standing as one of the most popular regions in the U.S., this movement is unlikely to persist. Renters staying put or those bucking the trends and looking to move into the Golden State should take advantage of the temporary breather sooner than later.
Michael Lucarelli is the CEO and co-founder of RentSpree.
