SAN FRANCISCO (KGO) — As consumers are hit with rising interest rates for the third time, a local economist predicts big impacts will soon hit the Bay Area rental market.
Whether it’s at the grocery store or the gas pump, the cost of nearly everything is going up. But, thankfully Bay Area rents haven’t quite fully returned to pre-pandemic rates.
RELATED: California lawmakers reach deal on pair of bills to build more housing amid shortage
Rents in San Francisco, Oakland, and Berkeley metro areas are still down around three percent compared to pre-pandemic rates. In San Jose, Sunnyvale, and Santa Clara metro areas rents are down just over one percent from pre-pandemic, according to data compiled from Apartment List.
But experts say that won’t last long.
“Rents will be back sooner than you think,” said Neil Canlas, co-owner of San Francisco real estate firm the Canlas Brothers.
“Define soon,” ABC7’s Stephanie Sierra asked.
“I think we could probably see a five to 10 percent increase at least by the end of the year and from there it would incrementally go up a couple percent every quarter,” Canlas said.
VIDEO: Are Bay Area housing prices about to drop? Here’s what experts say as interest rates hike
Canlas studies trends across the Bay Area real estate and rental markets. He’s seeing first-hand how the interest rate hikes are impacting the local housing market.
“Sellers can’t get the numbers they want to sell their home and buyers’ affordability has significantly changed with interest rates nearly doubling within the last year,” Canlas said. “These once buyers are now going to be renters.”
Purchasing power to buy a home has dramatically shifted in the Bay Area. A new report from Redfin shows luxury home sales have plummeted 28 percent across the country. But the decline is twice as severe in the Bay Area-where luxury homes are priced in the multi-million dollar range, estimated to be properties valued in the top five percent of the market.
RELATED: New California program for first-time homebuyers will let you borrow down payment at 0% interest
Oakland is reporting the largest decline in luxury home sales among the country’s 50 most populous metro-areas – a 63.9 percent drop. San Jose not far behind reporting a 55 percent drop.
“We know the whole housing market is cooling,” said Taylor Marr, the Deputy Chief Economist for Redfin.
Marr says it’s possible the cooldown may bring some relief to the rental market. But it won’t be anytime soon.
“Potentially the owners of these housing units don’t want to list it for sale in a really cool housing market. So they’re listing it up for rent…so that supply is also following that demand which mitigates some of that impact on the rising rents,” said Marr.
VIDEO: Here’s how you can get lower mortgage rate on bigger loan
But, Marr says that’s not expected to happen for at least six months – assuming rising interest rates continue to weaken our economy and push it further into a recession by next spring.
So when is the best time to rent?
Experts say the seasons do play a role in finding rental deals. For example, Marr recommends the best time to start a lease is anytime between November and March. Data shows tenants usually save $100 to $300 per month on the same unit during those months compared to the summer.
If you’re on the ABC7 News app, click here to watch live
Copyright © 2022 KGO-TV. All Rights Reserved.