Following a pandemic exodus, realtors have said that more people are returning to San Francisco. But would-be buyers are increasingly abandoning house searches and, instead, are renting.
San Francisco’s average rent sat at $4,106 in September. That’s up 12.7 percent from last year, but down from earlier highs, RentHub data shows.
“Even though it’s up from last year, it still is not quite back to where it was pre-pandemic on the rental side,” said Nicholas Chen, who has worked as a Realtor in San Francisco for 14 years.
In 2020, average rental prices dropped by 27 percent in San Francisco, according to RentHub, but began moving slowly upwards as of January, 2021.
The most recent data shows that zip codes 94118 and 94115, which include the Inner Richmond, Western Addition and Japantown, recovered fastest, where median rent has increased more than 40 percent since last September. In 94110, which includes the Inner Mission and Bernal Heights, rents increased around 11 percent, reaching $4,000 a month for the listed units.
“The rent during a pandemic is artificially low because of the large outflow of people, so the rates are just returning to where they should be,” said Jennifer Rosdail, another Realtor focusing on San Francisco. She said neighborhoods with bigger buildings, where people need to pass through a lobby and share the elevators, were hit hardest by the pandemic.
Rosdail said that demand has also impacted the supply for rentals.
Lawrence A. Souza, a senior real estate economist and professor at the University of San Francisco, said San Francisco’s rents are rising at a rate commensurate with the economic recovery from the pandemic. That, however, is not the case with residential sales prices, as rising interest rates have driven more customers to the rental market.
This development may contribute to the uptick in rents and the decline of home prices.
Compass, the country’s largest independent real estate brokerage, reported that the third quarter median home sales prices retreated dramatically from spring peaks, which are typically the highest prices of the year. Prices in the third quarter dropped by 8.7 percent, compared to the same period a year ago, and 17.5 percent from the second quarter.
“Part of this was due to seasonal trends; in many markets, median sales prices often peak for the calendar year in the second quarter, then drop in summer,” explained Patrick Carlisle, Compass’ chief market analyst. But part of the decline was clearly due to changing market conditions prompted by increases in interest rates, and declines in stock markets and consumer confidence.”
A client of Chen’s, for example, has been looking for a 2-bedroom condominium with outdoor space, with a budget of $1.2 million. But with interest rates moving up, he began to see the estimate of his monthly mortgage payment increase as well. Even though property prices were decreasing, the amount he had to pay on his mortgage would increase by 15 to 20 percent.
Eventually, he decided to rent for another year or two, waiting for the interest rates to go down.