According to a recent report from RENTCafe, residential rental rates across the US are starting to slow down. The average rent in the country reached $1,314 in April 2017, which reflects only a $2 increase from the previous month and just 2% higher compared to 2016.
California’s rental market on the other hand, is unaffected by the declining rental rates across the country. In fact, rents in California are increasing rapidly compared to other states. 11 out of 20 cities in the US with the most significant rent increase are within the state of California.
Rent trends in California
According to this article from the first tuesday Journal, cities in California with the most significant increases in average rents are:
- El Cajon, increasing 7.8% to $1,387;
- Fairfield, increasing 8.4% to $1,601;
- Fontana, increasing 7.5% to $1,163;
- Lancaster, increasing 10.9% to $1,101;
- Modesto, increasing 9.4% to $1,083;
- Moreno Valley, increasing 7% to $1,343;
- Pomona, increasing 7% to $1,441;
- Sacramento, increasing 9.2% to $1,212;
- Santa Rosa, increasing 9.4% to $1,775;
- Stockton, increasing 11.2% to $1,029; and
- Victorville, increasing 7.6% to $968.
Peripheral cities experiencing the fastest growth
Out of all the areas with rapidly increasing rental rates, most of them are not within large urban areas, but in peripheral cities. This is largely due to the fact that metro centers are currently experiencing rapid growth in terms of both job opportunities and population, which boosts demand for available units in nearby rental markets.
Because most jobs are located in high cost cities such as San Francisco, San Jose, and Santa Clara, many of those who relocate to California tend to set their sights on the outskirts, where housing is more affordable. This explains why in smaller cities such as Fairfield, Modesto and Stockton, there is a rapidly rising demand for apartments, in addition to a limited inventory of available rentals.
With communities on the outskirts of large cities experiencing increased renter demand, rents are rising at even higher rates compared to nearby metros. In the San Diego area for example, the average rent increased by just 1.9% compared to 2016. If you take a look at nearby areas however, rents increased at a much higher rate. Chula Vista’s rents increased by 4.4%, Escondido had a 5.7% increase and El Cajon had a 7.8% increase in rents.
Conversely, high-cost cities such as San Francisco along with its surrounding suburbs are now experiencing a decrease in rental rates. However; San Francisco’s rental rates are still more expensive compared to the rest of California.
Already reaching its peak?
Although rental markets throughout California continue to thrive due to unfulfilled demand and inflated rent, slowdown in high-demand areas may suggest that the rates could now be hitting their peaks.
Because increased demand is boosting rents, the construction for more multi-family developments is on the horizon. As the inventory keeps up in order to meet the rising renter demand, rental markets will stabilize with more affordable prices, which is a common trend in other areas throughout the country.