In September of this year, while overall rental prices in the United States continued to decline, the Silicon Valley area saw a contrary increase. According to the latest report, the median rent in 50 major metropolitan areas across the U.S. decreased by 0.4% year-on-year, marking a 38-month consecutive decrease. However, the rent in downtown San Jose, the central city of Silicon Valley, increased by 6%, reaching a historic high.
Realtor.com released a report on Thursday, October 15th, which compiled data on studio, one-bedroom, and two-bedroom rental properties. The median rent for September was $1,694 per month. Despite the 38-month continuous year-on-year decline, the 0.4% drop represents the smallest decrease in nearly three years.
Compared to the peak in August 2022, current rents are down by 4.5%, but still 14.5% higher than pre-pandemic levels. The report also found that around 43.9% of rental listings in September offered rent discounts or other incentives, an increase of 1.3 percentage points from a year ago.
In contrast to the overall decline in rents across the U.S., the San Francisco Bay Area saw increases. In San Jose, the median rent in September rose by 6% to $3,565 per month, reaching a historic high, while San Francisco saw a 4.8% increase, reaching $3,057.
Realtor.com believes that the development of the artificial intelligence (AI) industry is driving the demand for tech talent, attracting more young professionals to work in the Bay Area and thereby increasing the demand for rental housing.
As the rental market tightens, the percentage of landlords offering incentives has significantly decreased. In San Jose, the proportion of rental properties offering incentives decreased from 51.9% a year ago to 24.3%, while in San Francisco, it decreased from 47.6% to 28.1%.
In addition to Silicon Valley, some cities in the U.S. with lower rental prices have also seen increases. In September, rents in St. Louis increased by 2% year-on-year, compared to a 4.4% decline in the same period last year; Minneapolis shifted from a 3.4% decline last year to a 1.7% increase this year; and Las Vegas went from a 3.2% decline to a 0.9% increase.
The report suggests that some renters are moving to cities with lower rents, contributing to the increased demand for rental housing in these areas.
On the other hand, cities that have seen a significant increase in the construction of rental properties post-pandemic continue to experience rent decreases, albeit at a narrowing rate. In September, Austin saw a 2.3% year-on-year rent decrease, compared to a 7.8% decline in the same period last year, while Phoenix’s decrease narrowed from 5.8% last year to 1.9% this year.