Some of the major cities in California saw rental prices plunge amid declining demand as the areas saw population losses, according to the rental online platform Zumper.
Oakland saw rent plunge more than 9 percent in May, followed by Sacramento, which recorded an 8 percent drop compared to the same time a year ago. Overall, seven of the 11 California cities that Zumper looked showed a drop in May.
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By comparison, Syracuse, New York, and Columbus, Ohio, saw two of the highest rent increases. Syracuse saw rent soar nearly 29 percent, while Columbus recorded a jump of 22.5 percent.
The trend in California went against how the rental market performed at the national level. Zumper's national rent index reported that one-bedroom homes saw median prices go up more than 1 percent to a little over $1,500. Two-bedroom properties saw prices jump to close to $1,900, which was also a more than a 1 percent increase.
Part of the explanation behind the falling of rent prices in the Golden State is a dwindling number of people living in cities. The departure of people in places like San Francisco reduced demand for properties, which in turn has pushed down prices.
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The Bay Area of San Francisco-Oakland-Fremont saw the number of residents fall by nearly 4 percent from 2020 to 2023, according to an analysis of U.S. Census figures by the data analysis firm RealPage. The Los Angeles-Long Beach-Anaheim area lost close to 3 percent of its population, followed by San Jose-Sunnyvale-Santa Clara, which saw its number of residents fall by 2.5 percent during the same period.
"It seems that it's less of a supply factor that's driving rents down in California, which is a trend that we've been seeing in a lot of other U.S. markets since there's been record supply hitting the U.S. this year, but it's more of a demand [issue]," Crystal Chen, a spokesperson at Zumper, told Newsweek.
Chen added that drop in demand may have been due to the Bay Area and the Los Angeles metro area witnessing some of the largest population losses in the last few years.
"The demand for housing has, you know, has lessened. And therefore that's where prices have gone down annually in, in a lot of these big cities," she said.
Zumper also pointed out that some California cities are struggling to recover the jobs they lost during the COVID-19 pandemic. Los Angeles has 60,000 fewer jobs right now than it did before the coronavirus hit and led to strict lockdowns that forced businesses to lay off employees.
San Francisco has 45,000 fewer jobs than before the COVID-induced economic crisis. Meanwhile, California's 5.3 percent unemployment rate is 1 percentage point higher than the national rate, contributing to a struggling rental market in the state, according to Zumper.
The challenging jobs market could mean that rental prices in cities in California may continue to fall going forward.
"The California economy isn't doing the best right now and I think in the short term this trend will continue to happen where people are moving out of California since it's so expensive to live here," Chen told Newsweek.
"Even though [rental prices are] offset by seasonality since a lot of leases end in summer months and so the demand usually picks up around then, but, if anything, it may be flatten out and then in the winter months will probably drop a lot again."
Update 5/28/24, 2:40 p.m. ET: This story has been updated with comments from Zumper spokesperson.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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