Rent is considerably cheaper than it was a year ago in some of the priciest metro areas in the U.S. as a result of the coronavirus pandemic, according to a new report from Apartment List. Grow's analysis of this data shows that in some of the most traditionally expensive cities in the country — including San Francisco, New York, Boston, Seattle, and Washington, D.C. — median rents were 10% to 25% cheaper this October than they were a year ago.
Typically, rental prices rise and fall seasonally, explains Chris Salviati, an economist with Apartment List: They go up in spring and summer because that's when most people move, and they drop in the fall once peak moving season ends.
This year, however, coronavirus lockdowns severely cut into that seasonal time frame, Salviati says. Many of the shelter-in-place orders early in the pandemic "included specific guidance that folks weren't supposed to be moving unless it was something that they really couldn't avoid," he says. And without that turnover, rents didn't get their typical spring and summer pop.
"Right now, we're at negative 1.4% year-over-year growth, whereas the past couple of years, we were seeing year-over-year growth in the 2%-3% range at this time of year," Salviati says.
To measure how rents changed, we used Apartment List's data for the median cost of one-bedroom apartments in October 2019 and October 2020. Our analysis shows that, of the nearly 500 U.S. cities Apartment List includes in its index, more than a quarter saw decreases in median rents of 2% or more.
The biggest drops were in some of the country's priciest areas: San Francisco fell by 23%, New York by 17%, and Washington, D.C., by 11%. Smaller cities surrounding urban cores also saw rents tumble.
The map below shows the 10 cities where median rent fell the most between October 2019 and 2020.
Rent is not falling universally across the U.S. In fact, in many cities, rents have stayed flat or even increased. However, in some of the country's hottest real estate markets, like San Francisco and Silicon Valley, falling rents have been notable and widespread. Many big tech firms based in Northern California embraced remote work early, and they've said they will continue doing so even after the pandemic ends. As more employers untether their workers from high-rent ZIP codes, the drop in demand in those expensive areas is likely to continue driving prices down, Salviati says.
Gerta Malaj, who lives in a one-bedroom apartment with her husband in San Francisco, decided to try negotiating her rent when the couple's lease was up for renewal last month. "I kept hearing from my network as they were starting to negotiate rent," Malaj says. "I kept hearing that rents in San Francisco are going down. People are moving out, moving with their families outside of the city."
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With some research, she found that available one-bedroom units in her building were listed for more than 20% less than what she was paying. In addition, her building was offering new tenants other incentives, like six weeks free.
Malaj used all that information to negotiate the terms of a new lease that was much cheaper than her previous one. "Including the free weeks that I negotiated, I think it comes down to lowering it 30% or so," she says.
Looking to the future, the trend of falling rents will not only be contingent on coronavirus lockdowns, but also on the ability for certain people to continue working remotely, Salviati says. A recent survey by the Federal Reserve Bank of Dallas found that nearly a quarter of employed adults worked from home every day, and an additional 18% worked from home some of the time.
Of the 25 cities where median rent dropped 10% or more, 11 are in the Bay Area. However, even modestly cheaper rents in the most expensive city in the country may not be enough to woo newcomers, at least not while remote work continues to be the norm. Adding to the competition, some smaller, more affordable cities even incentivize remote workers to relocate with cash bonuses.
"It's not just the outflows of folks leaving the cities; it's also kind of a lack of new folks coming in," he says. "If you were starting a new job in San Francisco, and you're not currently living there, then there's really no reason to move right now."
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