While June’s median rent prices are seeing slight increases since May, year-over-year costs throughout the county and Bay Area are still lower, with more significant disparities between single-family residences and apartments.
The increase in San Mateo County is partly attributable to seasonal fluctuations, but the overall market is still recovering from year-over-year declines. Redwood City, for instance, has seen a 9% drop in rent prices — across all property types — from last June, according to Zillow data, despite a more recent 12% increase from May to June.
A Zumper report shows that San Francisco’s median rent for two-bedroom apartments is about 3.4% lower than it was the year before, and 1.3% lower for one bedrooms. San Jose also noticed decreases in its one and two-bedroom rental prices. The local drop also mirrors a national trend.
But Robert Pedro, owner of Signature Realty, said single-family home rentals are buoying what would be an even more precipitous drop in the area, as recent construction comprises mostly apartments, not single-family homes.
“With the smaller rentals for studios, one-bedrooms and two-bedrooms, the new supply is having the desired effect, but we are still seeing upward pressure on single-family residences,” Pedro said. “Since that product isn’t being built, it makes sense their rental prices are high … when was the last time someone built a significant number of single-family homes?”
About nine out of the 15 commercial or multi-unit residential projects in San Mateo have requested extensions, with almost all of them submitting the requests starting last year. Much of the requests stem from financing difficulties, a common theme across the county. As a high interest-rate environment, commercial vacancies and tight labor market continue — evidenced by ongoing layoffs — lenders and investors are still apprehensive about signing off on such projects. Foster City is implementing a new entitlement extension policy at the request of multiple builders struggling with securing financing.
Pedro added that when interests go up, investors also have to increase their capitalization rates, or the property’s projected return on investment.
“When you increase the cap rate, it causes the valuation of the building to decline, unless there is an increase in income or rent. Since rents are relatively flat … that’s causing devaluation of the asset class,” he said.
According to Zillow data, the median rent throughout San Mateo County is about $3,980 per month — across all property types — which is $630 higher than San Francisco's, and pushed up largely by cities like Atherton and Woodside, which have $6,250 and $8,200 median monthly rents, respectively. Belmont and Daly City have some of the lowest median rents in the county, $2,700 and $2,650, respectively.
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