Rental application trends in California’s top 5 cities

California’s population is at its lowest growth rate in over a century. The Los Angeles Times reports, “From July 1, 2019, to July 1, 2020, California saw a net gain of only 21,200 new residents — a 0.05% growth rate not seen since 1900.” (Hayley Smith, Hailey Branson-Potts, “COVID-19 drives California population growth to record lows,” LA Times, Dec. 16, 2020)

The low growth rate has been occurring for several years now, mostly due to the high living costs in California’s major metro areas.While some Californians are moving temporarily and permanently out of state, many are choosing to relocate to more affordable cities within the state. Over the past half-decade, there has been a slow migration away from high-priced coastal cities towards more affordable inland cities. ((Michelle Robertson, “A new trend in statewide migration: Californians ditching coastal cities and moving inland,” SFGate. Jan. 18, 2020: https://www.sfgate.com/bayarea/article/bay-area-exodus-migration-sacramento-moving-12474547.php)) The pandemic heightened this migration for cities like San Francisco and San Jose.

To better understand the internal migration patterns within California, we used our rental application platform to gather data on the average number of applicants per property (APP) month over month from January 2019 to October 2020 for the five most populous cities in California. This data also gave insight into what occurred within that 22-month span and how the California rental market will look in 2021. Here are some of our key findings:

• On average, Fresno was the most competitive city to rent in 2019 and 2020.
• San Diego averaged the lowest number of applicants each month.
• Four of the five cities saw an increase in competition in rental properties from 2019 to 2020.
• San Francisco was the sole city to see a decrease in competition for rental properties in 2020 from 2019.

Los Angeles

Average Number of Applicants per Property Remains Steady in L.A.

Due to Los Angeles’ high density and population, the pandemic hit the metro area particularly hard. According to CoStar's analytics report, the pandemic and intermittent shutdowns struck high-end luxury apartments the hardest in the spring of 2020. ((Steve Basham, “Apartment Rents Declining in Los Angeles for the First Time Since the Great Recession,” CoStar April 02, 2020)

For the first time since 2010, rent prices declined significantly, dropping two cents per square foot (Steve Basham, “Apartment Rents Declining in Los Angeles for the First Time Since the Great Recession,” CoStar April 02, 2020).

This decline might not seem substantial, but when multiplied by the number of renters in LA, it makes a difference.Even though the high-end apartment rental market took a hit due to the increased quantity of vacancies, the number of applications per rental property steadily increased from January (2.11 APP) to July (2.48 APP) 2020 despite the pandemic. More below on what happened in the L.A. rental market over the past two years:

• Although rent prices dropped, there were still enough Los Angelenos looking and needing to lease homes
• Between 2019 and 2020, a 0.15 increase in the average number of applicants per rental property occurred
• July 2020 saw the highest APP at 2.48 over the 22-month span

San Diego

San Diego Experienced Even Greater Rental Competition in 2020

Throughout 2019 and 2020, people moved to or stayed in San Diego. San Diego, unlike California’s other populous coastal cities (San Francisco, San Jose, and Los Angeles) withstood the dramatic increase in leasing vacancies.Due to San Diego’s continued increase in popularity and the low number of housing vacancies in 2020, intense competition occurred amongst renters.

• San Diego averaged 2.05 applicants per property from January through October of 2020, 0.55 applications more than the same period of time in 2019.
• More so than the other California cities, San Diego experienced dramatic monthly spikes in the number of applicants per rental property.

Some of these northern California coastal residents moved to San Diego, which caused rent prices to stay relatively stable between 2019 and 2020. According to Zumper’s 2021 National Report, the year over year percentage drop for a one-bedroom apartment was only 0.6%. In comparison, the average one-bedroom apartment in San Francisco dropped by 24%. ((Neil Gerstein, “Zumper National Rent Report: January 2021,” Zumper, Jan. 05, 2021: https://www.zumper.com/blog/rental-price-data/)) This minimal change in the cost of living further reveals how competitive the San Diego market can be depending on the month.

San Jose

Applications for Non-Luxury Apartments Climb

From 2019 to 2020 rent in San Jose dropped by an average of 7.7%, according to RentCafe’s year-end report. ((Irina Lupa, “Year-End Report 2020: Rental Season Delayed and Cut Short, Gen Z Renters Overtake Gen X, and Big City Rents Drop,” RentCafe. Dec. 16, 2020: https://www.rentcafe.com/blog/rental-market/market-snapshots/year-end-report-2020/)) Surprisingly though, the number of applicants year-over-year stayed relatively the same in San Jose. To get a better picture of why this occurred, we compared the rental market in 2019 to 2020.In 2019, San Jose’s rental market was red hot. The highest number of applicants per rental property hit 2.9 in March and didn’t come close throughout the rest of 2019 and in 2020, except for July, which had the second most applicants per property at 2.57.The 2019 hot-streak was mostly due to competition for high-end luxury apartments, often referred to as Class A buildings. These Class A luxury apartments were the main competition for housing because young professionals, tech workers, and other upper-class San Joseians did not have the purchasing power to afford homes in the city and settled for luxury apartments and highrises. ((“City of San Jose Housing Market Update: First Quarter 2019,” Sanjoseca.gov. May 22, 2019: https://www.sanjoseca.gov/home/showpublisheddocument?id=38717))Once the pandemic hit in 2020, many of the wealthier professionals either left or moved within the city to more affordable areas. ((Lloyd Alaban, “Rent prices fall 7.7% in San Jose, but mostly from a drop in demand for luxury rentals,” San Jose Spotlight. Dec. 18, 2020: https://sanjosespotlight.com/rent-prices-fall-7-7-in-san-jose-but-mostly-from-a-drop-in-demand-for-luxury-rentals/)) During this time, rent decreased, but almost exclusively for the high-end Class A apartments. As wealthier professionals moved to more affordable spaces, competition remained constant, putting excess pressure on middle-class and low-income San Jose residents.

• From January to October 2020, there were 0.13 more APP on average than the year before.
• In 2020, lower-income residents faced extreme competition for housing due to gentrification and increased demand for mid and low-tier apartment complexes, which caused minimal price changes.

San Francisco

San Francisco Averaged More Applications Per Property in 2019 Than in 2020

In June of 2019, San Francisco’s rent prices broke an all-time high with the median price for a one-bedroom apartment averaging $3,720. Simultaneously, two-bedrooms averaged $4,800. ((Crystal Chen, “Zumper National Rent Report: July 2019,” Zumper. July 01, 2019: https://www.zumper.com/blog/zumper-national-rent-report-july-2019/)) Even though one and two-bedroom apartment prices in San Francisco were the highest in the country, the demand was there to meet it. San Francisco averaged 2.44 APP in July of 2019.The 2019 fall wildfires caused a massive alarm, with Pacific Gas & Electric (PG&E) turning off power on October 9, 2019, for an unprecedented amount of residents in northern and central California. ((Guardian Staff and Agencies, “California: north and south battle wildfires as preventive shutoffs hit millions,” The Guardian. Oct. 10, 2019: https://www.theguardian.com/us-news/2019/oct/10/san-francisco-wildfire-bay-area-sanders-ranch)) The fear from those wildfires and loss of electrical power pushed many to flee the city either temporarily or permanently. Paradoxically, rental prices inched up during the wildfires. According to Zumper’s October Rental Report, the average price of a one-bedroom increased 0.3% to $3,550 while two bedrooms dropped 0.8% to $4,750. ((Crystal Chen, “Zumper National Rent Report: October 2019,” Zumper. Sept. 30, 2019: https://www.zumper.com/blog/zumper-national-rent-report-october-2019/))

• Competition spiked in October of 2019 with 2.63 applicants per property—the highest number of applicants for any month in 2019 and 2020.

After the October jump in applications, the market readjusted in November of 2019 but saw a steady increase as more people returned to San Francisco after the initial alarm from the wildfires dispersed. This upward trend occurred until the coronavirus pandemic hit northern California.

Despite Lower Rent Prices in 2020, Leasing Applications Were Down From 2019

Compared to quarter one of 2019, rent prices were still relatively low at the beginning of 2020. Thus, the competition for living spaces continued to increase in 2020 with 0.18 applicants more between January and March of 2020 than compared to the same time frame in 2019. Starting in April, the severity of COVID-19 became more well known, which caused leasing vacancies to skyrocket.The increased rental property vacancies in 2020 was twofold:

• First, a mass exodus occurred within the Golden Gate City due to COVID-19 fears and an unwillingness to pay such high prices for so little space during ongoing quarantine and lockdown stages.
• Second, the vacancies were exacerbated by the reduction in new residents refusing or postponing moving to the city.

According to RentCafe’s 2020 Report, San Francisco saw a 31% decrease in new residents moving to the city. ((Irina Lupa, “Year-End Report 2020: Rental Season Delayed and Cut Short, Gen Z Renters Overtake Gen X, and Big City Rents Drop,” RentCafe. Dec. 16, 2020: https://www.rentcafe.com/blog/rental-market/market-snapshots/year-end-report-2020/)) That decrease coupled with the exodus of San Francisco residents created a dramatic increase in vacancies across the city.

Due to the heightened vacancy in 2020, San Francisco was both the most-expensive and most rent-impacted city in the country. According to Apartment List’s 2020 National Report, “San Francisco saw a rent decline of 26.7% since March.” ((Chris Salviati, Igor Popov, and Rob Warnock, “Apartment List National Rent Report,” Apartment List. Dec. 28, 2020: https://www.apartmentlist.com/research/national-rent-data)) Again, the main culprit for this nearly 30% decrease in rent is the number of vacant properties.However, those who decided to stay in San Francisco and apply for new rental properties took advantage of the decreased prices. Even though property vacancies increased by 7.5% from June through August of 2020, the Bay City saw the typical summer-driven increase in applicants per property during that time frame.

• In June of 2020, there were 1.60 APP, while August 2020 experienced 2.14 APP
• A slight drop occurred in September 2020, that downturn is likely due to the typical seasonal drop off heading into the fall.

Fresno

Fresno Averaged 2.23 Applications Per Property in 2020

The Bay Area saw a significant increase in migration to other states and other California cities. Fresno became a recipient city of those Bay Area movers. From July 2019 to July 2020 the population in Fresno County rose by 7,285—the fourth-largest boom in the state. ((Bryant-Jon Anteola, “Fresno County keeps growing. Here’s how fast compared to other places in California,” Fresno Bee. Dec. 17, 2020: https://www.fresnobee.com/news/local/article247912385.html)) Due to Fresno’s continued population growth in 2020, property vacancies decreased, which in turn caused rent to increase. From January to November 2020 rental prices in Fresno increased by an average of 7.5%. ((Chris Salviati, Igor Popov, and Rob Warnock, “Apartment List National Rent Report,” Apartment List. Dec. 28, 2020: https://www.apartmentlist.com/research/national-rent-data))Out of the five most populous cities in California, Fresno saw the most volatility in rental applications over the past two years. According to Rob Warnock, a Research Associate from Apartment List, in 2020, those from “outside Fresno accounted for 35%” of search activity for the region, “a 6-7% point increase.” ((Dale Yurong, “Research shows more people migrating to central valley during pandemic,” ABC30. Aug. 26, 2020: https://abc30.com/fresno-apartments-apartment-search/6390506/))Looking at nearly two years, you can see that the average number of applicants per property in Fresno has dramatic spikes in the number of applications, followed by substantial lulls. The majority of this month over month volatility stems from the fact that most applicants find housing each month when they apply to multiple complexes, even if it’s not their first choice.As Fresno’s monthly volatility continues, you can expect these rental trends in 2021:

• The continued immigration into Freno and other inland cities will cause monthly competitive spikes to occur.
• The safest bet for getting lower rent deals, due to decreased demand, is the end of quarter four in 2021 and the beginning of quarter one in 2022.

2021 California Predictions

Some 2020 rental trends were shifted by the COVID-19 pandemic, which continues to affect California’s housing and rental market. Looking to 2021 and beyond, the five most populous cities’ trends can be paired geographically.

Northern California

Northern California’s two major cities, San Francisco and San Jose, should continue to see rent stay relatively low in comparison to prices in 2019. Exoduses occurred in both cities, but it is still too early to tell if previous or new residents will move to these cities to take advantage of the low rent. Even though rent decreased in both cities, at the end of 2020, San Francisco sits third, and San Jose fourth, for the highest rent prices in U.S. cities. ((Irina Lupa, “Year-End Report 2020: Rental Season Delayed and Cut Short, Gen Z Renters Overtake Gen X, and Big City Rents Drop,” RentCafe. Dec. 16, 2020: https://www.rentcafe.com/blog/rental-market/market-snapshots/year-end-report-2020/))

Southern California

San Diego and Los Angeles still retain their popularity and therefore costly rent. Both cities, despite a pandemic, can still attract new residents. As for rent prices, they will not increase drastically due to California’s recently passed Tenant Protection Act of 2019. This Act went into effect on January 01, 2020, and “limits annual rent increases to no more than 5%+ local CPI (CPI = inflation rate), or 10% whichever is lower.” ((“Summary of AB 1482 (the California Tenant Protection Act of 2019),” San Francisco Rent Board. Dec. 23, 2019: https://sfrb.org/article/summary-ab-1482-california-tenant-protection-act-2019))That being said, competition for rental properties will remain steady in Los Angeles and San Diego. In 2020, both metro areas experienced nearly the same amount of applicants per month — L.A. with 2.14 and San Diego with 2.15 month over month. Expect similar, if not stiffer, competition for properties in 2021.

Inland Cities

Fresno, the most-populous non-coastal city in California, will likely continue to see an increase in both rent and population. More and more coastal city residents seem to be wanting to move to Fresno for more affordable housing, which will continue to gentrify Fresno and force longtime middle-class residents into the suburbs or other areas entirely. ((Dale Yurong, “Research shows more people migrating to central valley during pandemic,” ABC30. Aug. 26, 2020: https://abc30.com/fresno-apartments-apartment-search/6390506/)) It will be intriguing to see the migration trends to and from Fresno in 2021.For more national rental and housing trends, see our 2021 real estate market trends.

Methodology

The average number of applicants per property in each California city derives from real estate agents using RentSpree’s rental application software. Each property address has a unique link that real estate agents send to their clients when they apply to lease. Using the unique links from each property, we were able to track the number of applications each property receives. Using the number of applications for each property, we calculated the average number of applications for rental properties month over month from January 2019 to October 2020.