As rental prices continue to rise across the U.S., California’s biggest cities are seeing a unique trend that sets them apart from the national trend: According to Zumper’s latest National Rental Report, the national rental index for one- and two-bedroom rental properties increased 1.2% in May 2024, but rents are falling in some of California’s major cities.
Rents fall in major California cities
According to the report, which analyzed data from nearly one million active listings in 100 cities, seven of California’s 11 largest metros saw negative annual rents for one-bedroom apartments. These declining markets are in the top 20% in terms of price and population. Oakland and Sacramento saw the biggest declines, with rents falling 9.1% and 8.1%, respectively. Other cities, including Los Angeles, San Jose, San Francisco, San Diego and Long Beach, also saw rent declines, albeit to a lesser extent.
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According to the report, the primary driver of the decline in rental prices is a decline in demand, not an increase in housing supply. The Bay Area and Los Angeles have suffered significant population outflows and job losses in recent years, and both cities have yet to fully recover. Additionally, California recorded the highest unemployment rate of any state in April 2024, further contributing to the decline in demand for rental housing.
A recent softening of California’s rental market could prove to be of some benefit to renters who decide to stay in the state: Lower rental prices could allow homeowners to move to more desirable areas that were previously out of reach.
Additionally, in a softening rental market, landlords are more likely to improve their properties with more competitive amenities to attract and retain tenants.
Finally, reduced demand may also encourage property owners to negotiate more favorable lease terms and offer incentives such as reduced security deposits, flexible lease terms, rent-free periods, etc. For renters considering moving to California or relocating within the state, the current market could present a worthwhile opportunity.
Nationwide rental market trends
In contrast to California, rents continue to rise in most other states. Cities such as Syracuse, New York, and Columbus, Ohio, are experiencing the fastest rent increases in the nation, with annual increases exceeding 20%. Rent increases in these cities are being driven by factors such as population growth and expanding job opportunities. Nationwide, the rental market remains competitive, with a competitiveness score of 73.4 out of 100 at the start of moving season, and nearly two-thirds of U.S. renters are renewing their leases.
Miami maintains its position as the most competitive rental market in the country, driven by strong employment prospects and a generally attractive lifestyle. The Chicago suburbs have grown to the second most competitive, influenced by the growing “hipster beer” trend that combines urban convenience with suburban affordability.
Regional differences and market trends
The supply-constrained Northeast dominates the small market rankings, with Pennsylvania’s Lehigh Valley leading the way. Minnesota’s Twin Cities and Memphis, Tennessee, have also seen significantly increased rental competition compared to last year, while New York City boroughs are also seeing a surge in demand for rental apartments.
California’s bucking the overall rental market trend and straying from the national direction highlights the regional nature of the housing market. While cities across the U.S. are struggling with rising rents and increased competition, California’s major cities are experiencing a temporary lull due to reduced demand. However, this trend is unlikely to last as California remains one of the most popular regions in the U.S. Renters who remain, or those considering bucking the trend and relocating to California, should take advantage of this temporary respite soon.
Michael Lucarelli is CEO and co-founder of RentSpree.
