As I was going through old blog posts, I found this brief installment from April 17th, 2014. Often I write that the current hot sellers market in the Bay is “prolonged,” “steady,” or “persistent,” but seeing these two headlines from over 3 years ago really shows just how unyielding it has been. It is highly unusual to be in such a strong, drawn-out market, but there’s no clear indicator that things will change anytime soon, either. Buyers and renters might find some relief now that autumn is here in hopes that it brings the usual seasonal cooling.
Find the original post immediately below. – Update October 22nd, 2017
Here are the headlines from the San Jose Mercury News in mid April 2014:
Rental article: Bay Area apartment rents set record 4/16/14
Excerpt: Bay Area apartment rents are rising at nearly double-digit annual rates and have reached record levels, according to a report released Tuesday, prompting some analysts to warn that the region’s economic boom could be choked off by the relentless rise….. Among the Bay Area’s three largest cities, San Jose had an average asking rent of $2,066 during this year’s January-March quarter, up 10.3 percent from the same period last year, RealFacts reported. Oakland had an average rental rate of $2,187, up 12.3 percent, while San Francisco posted an average of $3,057, up 9.5 percent.
Home buying article: Bay Area home prices jump year over year
Excerpt: March marked more than 20 consecutive months of year-over-year price gains for single-family homes in the East Bay, South Bay and Peninsula, according to real estate information service DataQuick, which released a report on March sales Wednesday…. The San Diego-based company said that prices were up 29.2 percent from the previous March in Alameda County to $575,000. In Contra Costa County, prices rose 22.8 percent to $425,000. Santa Clara County gained 20.3 percent to $800,000, and San Mateo County was up 13.2 percent to $860,000.
Whether you buy or rent, prices have been rising dramatically. When factoring in what housing will cost, include the trajectory of appreciation per month.
Whether you’re a long-term renter, temporary renter looking for a furnished rental, or a landlord, you’re probably wondering how the Silicon Valley’s apartment rental market is today and where it’s heading. Most real estate agents in this area do not deal with rentals, so rental housing is not typically something we track super closely. That being said, the same things that affect the residential resale market frequently effect the apartment rental market as well. So, without the help from my usual sources, such as the MLS (Multiple Listing Services), let’s look at what people are saying about the current trends.
Silicon Valley’s apartment rental market in the news
This February, bizjournals.com published three helpful articles, all written by Janice Bitters on the Silicon Valley’s apartment rental market. In these, she provides insight to investors with predictions for the market with some reflection on current and past trends. What to these articles express? That there has been high demand and rising rents for years, similar to the housing market. What she gleans from industry trends is that builders and landlords have been working very hard to fulfill the demand for luxury apartments, and that new developments in the high-end sector have begun to meet demand. With demand in the higher price point diminishing, she says, builders and landlords no longer have the same incentive to create rentals in this sector, and investors do not want to pursue the mid- to low-end rental market. Despite there still being a clear demand in lower-cost apartments, developers are unlikely to pursue that sector right now due to the high cost of land and construction.
To attract renters to the luxury units, landlords are offering concessions such as free month to rent. This suggests that, in the higher price point of the rental market, it’s cooled down and has swung towards the favor of renters after being hot for a long time. In housing terms, we would call this a shift from a seller’s market (the market is in the seller’s favor) to a buyer’s market (the market is in the buyer’s favor). It’s true that with residential home sales, it’s also cooler in the luxury tier (over $3 million) than more moderately priced homes for sale. Here are the articles where you can learn much more about the rental market:
(Check out the graph in this last article!)
Unfortunately, after a cool and wet winter market, rent growth rates exceeded last year this summer, making it a continued, hot market for landlords. According to Apartment List (an excellent resource for tracking the rental market by city), San Jose rent is up 2% from last year and up 0.5% from last month, with the median rent for a one bedroom at $2,060, and at $2,580 for a two bed unit. Comparatively, Apartment List states that San Francisco is the highest cost California city for rentals with the median price for a two bedroom at $3,060, which has remained stable since last year. They also compare the median two bed rental across other major cities in the lower 48 states, which show that San Jose in both growth and median price is higher than New York city. Needless to say, on their Renter Confidence Survey, San Jose rated F for Affordability (meanwhile garnering and A and an A- in jobs and weather respectively).
Sunnyvale rentals, like the purchase market, is higher than San Jose by a few hundred dollars (Apartment List states the medians as $2,230 for 1 bed and $2,800 for a two bed unit), and are up 3.1% since last year. A Santa Clara apartment will cost you more than San Jose (the whole city, there are higher and lower rent areas), but less than Sunnyvale. Campbell may be your best bet for a reasonable rent, decreasing 1.3% since last year, and the only one with a median rent under $2,000. Mountain View has seen huge yearly rent growth at a current 4.9%. Compare that to the national average of 2.9% and the California average of 4.2%. Despite the yearly growth, rentals are slightly more affordable here than in Santa Clara (the median is only about $30 less).
Apartment List does not analyze every city and town, nor do they study the difference between neighborhoods, such as comparing South San Jose with Willow Glen, but where they do give insight helps to show the major trends happening around the bay area. Check out Apartment List for more detailed analysis, and the most up-to-date information on the market. Also check out their Rentonomics page with more articles on renting.
Is there a solution to the lack of low-cost apartment rentals?
Analysts all believe there will be some market turnaround in the not too far future, but there are a few answers to where it may come from. CNBC published an article on the housing shortage dealing with high tech companies. Large industry leaders such as Google, Facebook, and Twitter continue to hire, bringing people into the area more quickly than developers are building, and forcing up the prices in both housing and rental markets. Employees have asked these companies to help, and some are responding. Google and Facebook have both come up with plans to construct affordable housing.
For years, California law has stated that a certain amount of affordable housing must be available in each community. Unfortunately, many communities are ignoring both the law and the need for such developments. If every community were to develop what the law required, the market would be much more balanced. Yet again, it’s the investors that are controlling the development, and it will not likely happen soon.
Shared housing is a way that many Silicon Valley employees work around the high cost of renting a home here. A bonus is that if you’re relocating to the San Jose – Cupertino – Palo Alto area or nearby, it’s that much easier to meet people in a communal living situation. For many, that means renting a house with a number of other people. In some cases, it translates renting a bedroom in a house where the only other residents are members of the same family. Either way, it helps to beat the high real estate costs, and may enable those who choose to live in a group setting to save faster to buy their own home.
To many, shared housing seems like a new concept, but I remember doing it when I was just out of college and teaching in the Los Angeles area, where rents seemed sky high to me at the time. When I returned to grad school, I did it again. Both experiences, though, convinced me that a longer commute and living along OR a shorter commute and living in a smaller space (a studio apartment) was a good trade off. Of course, this was in the 1980s, and we did not have web tools to help us to screen and find like minded roommates or house mates. I suspect it’s a lot better now.
Not having used any of these shared housing services, I cannot endorse any, but there are a number of sites to find house mates or communal living, and there are some companies which specialize in matching people to openings. If any of my readers can endorse a company or site, please let me know by email and I’ll update this article with that information. My word of caution, though: never send money by wire to someone you don’t know for an apartment or home you have not seen. There is a very serious problem with wire fraud, and you do not want to put your hard earned money at risk. Be safe out there!
Read more on the Silicon Valley real estate market:
Read about the various real estate markets by area within Silicon Valley: http://sanjoserealestatelosgatoshomes.com/
Get market stats for San Mateo County, Santa Clara County, and Santa Cruz County: http://popehandy.rereport.com
- San Mateo County $2884
- Santa Clara County $2552
- The San Francisco Bay Area as a whole (all 9 counties) $2451
- Alameda County $2172
- Contra Costa County $1825
These numbers are the median for the whole county in question – so in Santa Clara County, it will be a lot more if you are in Cupertino or Palo Alto or Los Gatos as opposed to the Alum Rock area of San Jose or Morgan Hill or Gilroy.
Houses are worse still. Small homes may be found for $2500 to $3000 in many areas. Places with better schools may run $4000 to $6000 per month for a home with better schools. Want the best? It’s likely to be $7000 – $8000 for a good sized, comfortable (do not read “elegant”) house with better schools – or more.
Update on August 25: I’m hearing that 1 bedroom apartments in Cupertino are running at around $2300 per month and a 2 bedroom at around $3000 per month.
Read the article in the Merc:
Bay Area rental crisis squeezing out middle class
Visiting Silicon Valley for job interview and considering a relocation: how to get a feel for where to live?
A few times a month I get phone calls from people considering a relocation to Silicon Valley. In most cases, a trip out to Palo Alto, Mountain View, Sunnyvale, Cupertino, San Jose, Menlo Park or somewhere else in the South Bay or Peninsula is planned. These questions always arise:
What should we see when visiting Silicon Valley?
What neighborhoods should we consider or tour while there?
First: know which part of Silicon Valley where the possible employer is located
Silicon Valley covers a lot of ground – most of 2 counties (Santa Clara County and San Mateo County) and snippets of a couple more, which the Silicon Valley sprawl now inching north toward San Francisco. The first thing to know is where the potential job is located. There’s a huge difference between Oracle in Redwood Shores, Apple in Cupertino or Cisco in North San Jose, let alone some of the more far reaching Silicon Valley areas like Scotts Valley, South San Jose (at the intersection of Hwy 85 and 101), over in Los Gatos (Netflix) or inching up the east Bay in Fremont or Hayward.
Second: know your commute tolerance and have your priorities organized
Everyone would like to live close to work (under a half hour commute) but if you are juggling multiple priorities such as having a house & yard for kids, needing good public schools, and bringing it in at less than $2 million, you may have to sort out which of the important priorities is the very most important and go from there. For many, the commute gets longer in order to provide the other things (a house not a condo or apartment, better schools, lower price). Most people say that they would like a commute of 30 minutes or less. Often they end up with a longer one after seeing a few areas and properties. Continue reading
Although normally I prefer to take photos than be featured in them or in videos, many of my Realtor friends from across the country have been telling me that our blog readers would like to see us on video (and not just read our typed words). So I’m caving in – and saying hello! Hope you enjoy this 4 minute video, shot from my home office in Los Gatos.
- Palo Alto (very costly)
- Cupertino (less expensive for the school scores compared to other areas up to #5 on this list)
- Saratoga (very expensive)
- Los Altos & Los Altos Hills
- Los Gatos & Monte Sereno (95030 & 95032)
- Parts of San Jose in Cambrian 95124 and Almaden 95120 (very good value)
- The Los Gatos Mountains (zip code 95033)
- Parts of Fremont (Mission San Jose area)
In many areas of the U.S., real estate agents actively work the rental market. In those areas, owners are willing to pay a commission for the service, and houses and condos are listed in the local multiple listing service.
Not in Silicon Valley, though. Instead, it’s a land of “for rent by owner”. A few properties may be on the MLS (see link below), but hardly any. Far less than 5%.
Two things are happening that create pressure:
- There are a lot of companies hiring, and many high tech people, especially, are moving to Silicon Valley
- People who have lost homes in foreclosure, or who had to do a short sale to avoid it, are not able to buy for at least a few years. They may double up with family or friends for awhile but eventually do rent.
With demand increasing like crazy, rents are increasing like crazy too. It’s the old tale of supply and demand: more demand than supply exists in the rental housing market today.
Just watch out for the scams! If a price sounds too good to be true, it probably is. I wrote about this not too long ago, please have a look:
Finding a place to rent – how do people locate one in Santa Clara County? Where can you find properties to lease or rent? I have a list of resources on my Valley of Hearts Delight blog – please click on the following link.
What about a broker or agent? Can a Realtor help you to find a rental home in Silicon Valley? Most of the time, a real estate sales person will not be of much help in finding rental properties, and that’s because they aren’t usually listed in the MLS (and the MLS is the way in which we are paid).
Sometimes, though, a rental is listed on our Multiple Listing Service (MLS). You can check it out directly at www.MLSListings.com – just select rental under “type”. The vast majority of rentals are online via Craigslist, though, and a real estate agent has no role in that type of rental property. Just beware of the scams, mentioned above, and always google the address of the property that looks interesting to see if it’s for sale also. If it is listed as for sale, the odds are that it’s not really for rent.
On occasion, members of the real estate community will know of a “courtesy rental” property, meaning that a client wants to rent it out but not necessarily put it on Craigslist or the MLS. Instead, it’s word of mouth. You do not need to call every real estate professional in town to ask if they have any courtesy rentals. Instead, turn to your trusted Realtor and ask him or her to inquire for you. Most agents are very happy to send out the request within their company and to top agents or managers of others nearby to ask on your behalf (but it’s no good if 10 Realtors are all circulating the same request, so please don’t give in to temptation and ask everyone for this favor.)
Many people who move to Silicon Valley want to rent initially. Los Gatos is a great place to start! Many newcomers say that Los Gatos is the “most European” of Silicon Valley’s cities and towns. I agree!
In addition to the El Gato Penthouse (in downtown LG on Main Street), a newer complex with some furnished rental units on the edge of Los Gatos next to Netflix is Aventino. It’s a luxurious community with granite counters in the kitchens, a beautiful pool and spa area, and secure parking.
The Bay Tree Apartments are in the Almond Grove District (downtown or “walk to town” Los Gatos) and they have both furnished and unfurnished, but they do not always have vacancies. Here’s their contact info to check back later or see if there’s a waiting list: 347 Massol Aven Los Gatos, CA 95030 (408) 354-7317.
Want to learn more about living in Los Gatos? Please visit my Live in Los Gatos blog and see selected pages on my popehandy.com website devoted to the town of the cats.
Want to purchase a house, condo or townhouse in Los Gatos? Here are some links to help you with your research.
Browse Los Gatos Homes for Sale on my popehandy.com site:
- Los Gatos homes for sale under $1,000,000
- Los Gatos homes for sale priced between $1 and $2 million dollars
- Los Gatos homes offered for sale between $2 and $3 million USD
- Los Gatos homes listed between $3 and $5 million USD
- Los Gatos luxury properties at or over $5,000,000