Bay Area renters hit with high prices and few choices last year may be in for more of the same in 2018.
Rates for one- and two-bedroom apartments in San Francisco, Oakland and San Jose last year stayed among the highest in the nation, according to new market reports. Scarce rentals and a robust local economy marked by steady tech hiring drove up Santa Clara County prices 3.2 percent from a year ago, according to real estate data firm Yardi Matrix.
"We think it's going to continue. People aren't going to rush out and buy new houses," said Doug Ressler, senior analyst with Yardi Matrix. Five of the top 10 most expensive U.S. cities to rent were in the Bay Area, and all saw prices increase year-to-year.
Ressler said the strong interest in the rental market is backed by a desire from young workers to rent rather than own, the new federal tax plan reducing deductions for mortgage interest and state and local property taxes, and a lack of other federal incentives to encourage home ownership.
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Bay Area renters could eventually get a break with new construction, Ressler said. Developers are planning roughly 17,700 new apartments in 79 new projects, making the Bay Area among the busiest regions for new apartment construction. "That's huge," he said.
The San Jose metro area saw one-bedroom rents stay at record highs, about $2,460 per month, but a bargain compared to a similar unit in San Francisco, which averaged $3,400, according to analysis by real estate website Zumper. Santa Clara County one-bedroom rents climbed nearly 10 percent last year, while two-bedroom prices rose almost 4 percent to $2,780.
The average one-bedroom rental in Mountain View, home to Google, went for $3,270, second only to San Francisco in price.
The San Francisco market showed signs of cooling, with the average two-bedroom going for $4,400, a 2 percent drop from the year before. It's still tops in the country and three times the national average of $1,391. In Oakland, rents for one-bedrooms stayed at $2,100, while two-bedroom units dropped 5 percent to $2,470, according to Zumper.
Crystal Chen, a data analyst for Zumper, said most of the heavy rental activity has been on the Peninsula. Chen noted that prices in San Francisco and Oakland have recently stayed flat, but San Jose "has been crazy for the last few months."
Looking to catch a break? The Midwest offered the best deals, with one-bedroom rents going for $674 in Toledo, Ohio, $672 in Tulsa, Okla., and $632 in Wichita, Kan.