As 2024 begins, there’s a notable shift in San Francisco’s multifamily housing market, hinting at a potential upturn. Apartment rents started to increase slightly in December 2023, which is seen as a potential indicator of a shift in the market and suggesting a possible recovery in rental demand. This development is particularly significant considering the market trends observed throughout 2023.
In 2023, San Francisco’s multifamily housing market faced a declining trajectory. This downturn was largely attributed to a considerable decrease in the city’s population in recent years. A dwindling population typically leads to reduced housing demand, resulting in higher vacancy rates, which we have seen in recent reports.
Landlords in San Francisco have been in a challenging financial position since 2019, which marks the last instance of rent increases. Despite stagnant or declining rental incomes, landlords have faced surging operating costs. Expenses related to labor, repairs, maintenance, and insurance have all increased, squeezing the profit margins of property owners. When adjusting for price inflation, the average rents in 2024 are approximately 20% lower than they were in 2019. This decline in real income has placed a financial strain on landlords and property managers.
Despite a challenging year in 2023, there is optimism among apartment owners fueled by recent population data from the California Department of Finance. This data indicates an increase in population in San Francisco County. Property owners are hopeful that this demographic shift will translate to higher demand for rental housing. If this population growth continues, it could offer a significant opportunity for landlords to recover from the losses experienced over the past few years.
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