San Francisco (KRON) – Almost no one is moving to San Francisco to save money.
They might come for the tech jobs, the artisanal espressos or the weather. But average home rent has jumped nearly 15 percent in the past year – to $3,129 last month – according to real estate data firm Zillow.
Across the country, rising home prices have been shifting many Americans into rentals, a trend that driven up rents. Over the 12 months that ended in March, rents nationally climbed a seasonally adjusted average of 3.7 percent nationally, Zillow reported Wednesday.
The improving economy is largely to blame. Employers have added 3.1 million jobs over the past year, an influx of paychecks that being spent on apartments. But builders have been unable to ramp up construction to meet this new demand. So the shortage of apartments has helped fuel higher rents.
“It’s very hard for housing supply to respond quickly to increases in demand,” said Skylar Olsen, a senior economist at Zillow.
Exacerbating the squeeze, rents are rising faster than most people’s pay. This means that all the new jobs are producing both more people able to spend on housing and more of an affordability squeeze.
San Francisco epitomizes the trend.
The influx of tech money helped fuel an average 14.8 percent increase in housing rent in the San Francisco metro area over the past 12 months. In the nearby San Jose area, the jump was 12.3 percent. Rents average more than $3,000 a month in these areas.
That’s roughly $600 more than rent in the Los Angeles area, $800 more than metro New York City, and $1,000 more than the Washington, D.C., area.
Houses and condos are so expensive in San Francisco that tech employees with comfortable six-figure salaries often have no choice but to rent. Home purchases are often driven by startup companies issuing publicly traded stock, which employees than use to finance a home purchase.
This phenomenon causes both home and rental prices to increase, said Andrew Tam, a data scientist at Apartment List, a San Francisco-based company that helps apartment hunters across the country find homes.
In San Francisco’s Castro District, a median-priced two-bedroom rents for $5,010 a month, Apartment List found. Two-bedrooms go for $4,730 in Nob Hill, an 18.3 percent increase over the past year. And in Hayes Valley, a two-bedroom lists for $5,730, or 14.6 percent more than a year ago.
Prices are also climbing in cities without the same hype from startups and venture capital. Rents rose more than 8.5 percent over the past year in Denver, Louisville, Kansas City and Nashville, among other metro areas. In many cases, demand for apartments and rentals have outstripped the available supply of rental homes and apartments, causing prices to rise.
But a few other major cities are seeing a glut of rental properties. Rents have fallen over the past year in six of the United States’ 100 largest metro areas, including Chicago, Minneapolis, New Orleans and Rochester, New York.
More Americans have shifted to renting since the 2008 financial crisis and the housing bust, which caused an avalanche of foreclosures that depressed prices through 2012.
At the end of last year, 36 percent of Americans rented. That’s up from 31 percent before the Great Recession, according to the Census Bureau. Incomes have been rising at an annual clip of 2.1 percent, not enough for many families to save for down payments while paying higher rents.
Still, if one can afford to buy, the monthly costs of ownership remain lower than renting.
The monthly payments from owning a three-bedroom house are cheaper than renting a comparable property in 76 percent of U.S. counties, according to the housing data company RealtyTrac. The analysis released in April examined 461 counties with at least 100,000 people and sufficient housing data.
“From a pure affordability standpoint, renters who have saved enough to make a 10 percent down payment are better off buying in the majority of markets across the country,” said Daren Blomquist, vice president at RealtyTrac.