The Bay Area rental market was brutal last year for lots of people trying to find something they can afford. And analysts say that it’s not going to be much better in 2016.
“We certainly see rents going up again, perhaps overall in the 7 percent range,” said Jeffrey M. Mishkin, regional manager of Marcus and Millichap’s San Francisco office. That increase would come on top of 2015 increases of about 10 percent in San Francisco, 11 percent on the Peninsula and 12 percent in the East Bay, according to the real estate brokerage firm’s analyses.
Rents continue to rise at least in part because thousands of new units have been built. “Construction starts are at the highest level of about 30 years,” said Sara Bridge of RealFacts in Novato.
New units are priced to cover developers’ costs and meet their profit projections. “And when the demand is high, they can just keep ratcheting up rents — and they want to go as high as they can, obviously,” Bridge said.
Her company’s fourth-quarter report, released Friday, shows across-the-bay increases of close to 10 percent over the same period the previous year. In San Jose, the average monthly rent for an apartment rose to $2,436 — 9.4 percent more than the fourth-quarter average in 2014. In Oakland, the rise was more pronounced: up 13.7 percent to $2,806.
Where all this leaves average renters searching for affordable housing sometimes comes down to a matter of timing and luck.
Ask Caitlin and Mark Fisch. Last summer, the Fisches were renting a two-bedroom apartment in Mountain View for $2,575 a month. Close to a library and park, it was ideal for their three young children, and the family got by on Mark’s salary as a teacher while Caitlin home-schooled the kids. But stress set in — big-time — when their landlords asked them to sign a new one-year lease in September at $3,600 a month, or to go month-to-month at a whopping $6,566.
“We decided to move,” Caitlin said.
Around the Peninsula, they discovered two-bedroom units in the $2,000 to $3,000 range that were older and “more bare-bones” than their previous apartment, which was part of a large complex operated by a major real estate corporation. That one had a swimming pool. There was a washer and dryer right in their unit.
They snapped up a somewhat smaller two-bedroom unit in a much smaller complex, again in Mountain View, for $2,400 a month. “It popped up on Craigslist,” Caitlin said. “My husband went to look at it an hour after it posted and put down a deposit.
“We’re really, really fortunate,” she said, though she already worries “that our new landlord’s going to raise our rent after a year. I kind of wonder, ‘Now what?’ Will we have to keep uprooting the kids? I guess there’s a sense of insecurity about the housing situation for everyone.”
Such insecurity is familiar to Melissa Matheney, 25, who grew up in a tight-knit family in Alameda. Her great-grandparents moved to the island from Arkansas in the 1940s to seek work at the U.S. Naval Air Station. Her grandparents worked at the Del Monte plant, and Matheney equates Alameda with the very idea of family.
That is changing. As rents have gone up, her aunt has moved to Santa Rosa, and her mother and sister relocated to San Leandro.
In 2012, Matheney paid $1,350 a month for a two-bedroom apartment in Alameda. Today, she and her girlfriend share a two-bedroom unit — 800 square feet — for $2,380. Working full-time as a sales person at a retail store, she fears that another rent increase will push her out of Alameda — though she has no idea where. “I feel as though I am being priced out of the beautiful, tree-lined town that I grew up in,” she said. “I understand landlords have to make a living. But the increases that are occurring are just unnecessary and, in fact, in many instances are just plain cruel.”
Still the rental picture is complex. There’s more to it than a relentless upward trajectory. Across the Bay Area, there was a dip in the price of apartments over the last few months. Before that, some had projected East Bay increases for the year to reach a dizzying 15-17 percent, said Mishkin of Marcus and Millichap.
He wondered “whether rents have just reached the ridiculous level for many people,” causing some renters to momentarily back away from the premium prices being asked and forcing an adjustment by landlords.
Even with worries over the economy and stock market turbulence of early 2016, Mishkin said he expects the dip in rents to be temporary. The cost of apartments will go up once again, he predicted, because of continued demand for housing created by new jobs in the expanding tech workforce.
Kevin R. Kieffer, a Keller Williams agent in Danville who owns eight rental properties in the East Bay, agreed. “Based on limited supply and extremely high demand, I see rents going up at least 7 percent this year,” he said.
Not every landlord would agree.
Christine Romero, a tech manager who bought a condo as a rental property for $340,000 in 2003, was in the red for more than a decade, she said. Initially, she charged around $1,400 a month for the two-bedroom, two-bath unit then raised it to $1,550 in 2008. At that point, she held the rent steady for four years, wanting her tenants — a young family — to be able to make a go of it. Eventually, they left and bought a house in Fremont.
“We’re friends for a reason,” Romero said. “I never raised the rent on them.”
Last year, she spent $15,000 to remodel the kitchen, bathrooms and fireplace and rented the condo to new tenants in March for $2,695.
“Now I’m actually in the black for the first time,” she said — though not by much. After paying the mortgage, homeowners’ association fees and property taxes, her profit works out to about $100 per month, she said. Still, she can’t foresee raising the rent by more than $50.
“I bought my first house when I was 35, so I want for other people to do well, and that’s all there is to my story. I want for other kids to do well, too.”
Contact Richard Scheinin at 408-920-5069, read his stories at www.mercurynews.com/richard-scheinin and follow him at Twitter.com/RealEstateRag.
