If you want to see where rents are rising the most in California, follow the paychecks.
Let’s take a look at rent swings across California counties to see how much landlords are charging and who’s hiring. My trusty spreadsheet analyzed Zillow rental data for 30 large countiescomparing this spring (average March to May) with that of 2023 and that of 2019 before the coronavirus. These oscillations were combined with the ups and downs of State employment figures in those counties – count how many residents have jobs.
Think back to last year and how rents and jobs fluctuated.
Of these 30 counties, the 12 with job gains over the past 12 months had an average rent increase of 3.8%. Meanwhile, the 18 counties with the fewest workers had average rent increases of just 3.1%.
There are many factors that influence rents, from how many people need rental housing to how many new units are built. But we often forget one force that helps drive housing: you need a paycheck to be able to afford a place to live.
Puzzle pieces
Employment increases and decreases are key to understanding housing demand and prices.
This is especially true in a place as expensive as California.
Take a look at the counties where rent increased the most last year. Yes, these five counties had a mixed employment performance.
Saint Louis: Rents rise by 6.5% but job losses are 1.3%.
Monterey: Rents rise by 5.8% and employment gains by 2.9%.
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Shasta: Rents rise by 4.9% and employment gains by 1.1%.
Ash tree: Rents rise by 4.8% and 0.5% of jobs are lost.
Santa Cruz: Rents rise by 4.8% but job losses are 0.4%.
But to see that jobs matter in real estate, you have to focus on the counties with the lowest rent increases. All of them had contracting labor markets.
Saint Bernardine: Rents are up 2.2% and job losses are 0.6%.
Hill: Increase of 2.2% with job losses of 0.4%.
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The Angels: It rose by 1.9% with a job loss of 0.7%.
San Francisco: It rose by 0.5% with a job loss of 2.5%.
Mall: It fell by 1% with a job loss of 1.2%.
Longer lens
The influence of the labour market on rents is even clearer in the long term.
Take a long-range lens and go back to the spring of 2019, long before the pandemic upended the economy.
The 14 counties with job gains over the past five years saw rents rise by an average of 43 percent, while the 16 counties with the fewest jobs saw rent increases of just 25 percent.
Let’s look at the counties with the largest rent increases over five years and their wages…
Core: Rents increased by 52% and employment increased by 0.8%.
Saint Barbara: Rents rose by 52%, but employment fell by 1.8%.
Ash tree: Rents increased by 51% and employment increased by 1.8%.
Bank: Rents increased by 48% and employment increased by 4.4%.
Tulare: Rents increased by 47% and employment increased by 4.9%.
Next, let’s look at the counties with the lowest rental prices since 2019. All had unstable labor markets during the period…
Against Coast: Rents rise by 20% as employment falls by 3%.
Saint Clare: Rents rise by 11% while employment falls by 2.6%.
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Saint Matthew: Rents rise by 7% while employment falls by 4.3%.
Mall: Rents rise by 7% while employment falls by 3.4%.
San Francisco: Rents rise by 3% while employment falls by 4.9%.
Bottom line
Affordability matters, too, at a time when many workers can do their jobs remotely and commute to cheaper locations.
Consider the 10 cheapest counties, as of last spring. Rents averaged $1,974, up 41% over five years, as employment rose 1.5% from 2019.
Let’s compare this to the top end, the 10 counties with the most expensive rents.
These homeowners are getting an average cost of $3,297 per month, 67% higher than the cheapest markets.
And renters in California only got a 26% increase over five years. Why? Well, employment fell 3.3% in those labor markets.
In California, housing “bargains” are rare. So is it any surprise that four of the five counties with the cheapest rents have more employees than in 2019?
Ash tree: Rent at $1,922, up 51% in five years as employment rose 1.8%.
Core: Rent at $1,809, up 52% in five years. Employment rose 0.8%.
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Tulare: Rent at $1,802, up 47% in five years. Employment up 4.9%.
Hill: Rent at $1,633, up 25% in five years. Jobs down 6.5%.
Shasta: Rent at $1,577, up 41% in five years. Employment up 2.2%.
In contrast, the most expensive places in California to rent homes are the counties clustered near the Bay Area, which has not been a very attractive place for employment lately.
Marin: Rents at $3,914 rose 21% in five years, while employment fell 5.3%.
Santa Cruz: Rent at $3,575, up 36% in five years. Jobs down 6.5%.
Saint Clare: Rent at $3,356, up 11% in five years. Jobs down 2.6%.
San Francisco: Rent of $3,323, down 3% over five years. Employment down 4.9%.
Saint Matthew: Rent at $3,306, up 7% in five years. Jobs down 4.3%.
Jonathan Lansner is a business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
Originally Posted: July 11, 2024 at 7:24 am
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