Making a good salary in the Bay Area used to mean buying a home.
But over the last decade, high-income Bay Area residents have become far more likely to rent an apartment, condo or single-family home.
The number of renters making over $150,000 a year in San Jose and San Francisco has more than tripled since 2007, according to a new survey by Rent Cafe. The two cities now have the highest percentage of wealthy renters in the country.
It’s part of a national trend. The fastest-growing segment of renters in the U.S. has six-figure incomes, including in the Bay Area, according to a separate study by Apartment List. “The rental market has become more diverse,” Apartment List chief economist Igor Popov said.
High-income renters in the Bay Area are pulled by the lure of a city lifestyle and pushed into renting by high housing prices, he said.
Some prefer renting in a city with a fast-paced environment with growing amenities, such as ride-sharing and food-delivery services. “Renting offers more flexibility,” said Florentina Sarac, researcher for Rent Cafe. “You’re not tied down to a location.”
The studies reveal another symptom of the perfect Bay Area housing storm: high-paying tech and professional jobs grew over the last decade, but the region didn’t build a corresponding amount of homes and condos. Real estate agents say lots of high earners are choosing to wait out the super-heated housing market in comfortable rentals.
The number of homes for sale has scraped record lows, and median sales prices have climbed, year-over-year, since April 2012. The median re-sale price for a Bay Area home hit a record $935,000 in May, according to real estate data firm CoreLogic. Meanwhile, construction of new apartment complexes has outpaced single-family homes, with new urban units focusing on upscale renters.
“It’s harder than hell to find a place to buy,” said real estate agent Myron Von Raesfeld, president of Windermere Silicon Valley. “For a lot of people it’s become difficult and frustrating.”
Apartment List researchers estimate that 2 million high-income renters nationwide joined the market between 2008 and 2017, an increase of nearly 50 percent. The most expensive cities in the country — San Francisco, New York and Los Angeles — started with more high-wealth renters and had a slower growth rate than smaller markets.
San Francisco’s share of high-income renters grew by 65 percent and San Jose’s increased by 34 percent. By comparison, Denver, Austin, Texas and Oklahoma City saw wealthy renter populations more than double, according to Apartment List.
Rent Cafe researchers found about 1 in 5 San Jose renters top $150,000 in annual income, while San Francisco has more high-income renters than high-income home owners.
The population of wealthy renters grew in each of the Bay Area’s 16 largest cities, the study found. Between 2007 and 2017, Berkeley, Fairfield and Richmond saw four times as many wealthy renters join their cities. Oakland, San Jose, Santa Clara and Vallejo more than tripled their high-income renter populations.
Bay Area agents say many would-be homeowners sit on the sidelines and wait for the market to cool. Younger buyers also can be burdened by student debt, making it harder to amass a down payment.
Von Raesfeld, based in Santa Clara, said having a high salary and stock bonuses doesn’t ensure that someone can buy in Silicon Valley. Although the housing market has slowed, multiple offers and quick sales are still common in hot neighborhoods.
He’s seen young couples tire of the home search and settle for an apartment in a good neighborhood with ample amenities. “They’re getting very frustrated of competing in the marketplace,” he said.
Agent Nancie Allen, of Masterkey Real Estate in Fremont, said many renters still aspire to own a home, including millennials at their start of their careers. But high costs in the Bay Area have many deferring their dream.
“We’ve always had high-income renters,” Allen said. “There’s still a lack of housing near job centers.”