Rent Prices Tumble In California As People Move Out Of The State

A new report says California’s rent prices have declined as residents increasingly move out of the state.

Cities like Oakland and Sacramento saw rental price drops of more than 8% in May compared to the previous year, according to a report issued by Zumper, triggering a trend in contrast with the national rent index, which saw an increase of 1.2% this month for both one- and two-bedroom apartments.

According to the report, the reduction in California’s rental costs comes amid a decreasing population in major cities, accelerated by the state’s higher living costs.

The Bay Area and Los Angeles have seen sharp population decreases, which are further compounded by a sluggish recovery in the job market. 

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According to Zumper CEO Anthemos Georgiades, it marks the first instance of a monthly growth rate exceeding 1% since October 2022, suggesting a potential increase in consumer price index pressures and further delays in anticipated rate cuts by the Federal Reserve.

"May marks the first time we've seen national monthly growth rates of over 1% since October 2022," Georgiades said in the report. "This notable rise in rent coupled with the current persisting inflation suggests that there will be even more pressure put on the CPI in the coming months and rate cuts by the Fed may be pushed back further than previously anticipated."

Seven of the eleven cities analyzed by Zumper reported negative annual rates for one-bedroom units, with Oakland and Sacramento leading the downturn with decreases of 8% to 9%.

The decrease in California’s rental prices can be traced back to population declines in its major urban areas — San Francisco, Los Angeles, and San Diego — which have lost residents and struggled to rebound in employment post-pandemic. 

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For instance, Los Angeles currently has 60,000 fewer jobs than pre-COVID-19. The report found that San Francisco has lost about 45,000 jobs, reflecting a broader trend of economic stagnation that has contributed to reduced rental market demands.

Conversely, cities like Syracuse, New York, and Columbus, Ohio, have seen dramatic increases in rental prices, attributed to their economic and population growth. Syracuse, for instance, saw a 28.6% rise in one-bedroom rents, influenced by local population increases and limited housing availability. Similarly, Columbus has benefited from new investments by major tech companies, stimulating both population growth and rental market demand.

Further exacerbating the issue, California posted the highest unemployment rate among all states in April, at 5.3%. Zumper said its high unemployment rate and ongoing net move-outs — particularly in markets like San Diego — depress the rental market.

Sacramento’s occupancy rates have also declined every quarter since 2021, reflecting a broader statewide trend.

Those factors collectively contribute to the softened rental market in California, contrasting with the national trend where rents have been rising.

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