There were probably plenty of people eager to flip the calendar to 2021 after everything that 2020 brought with it, including a global pandemic. COVID-19 shaped industry trends and consumer behavior in 2020, and local real estate markets were no exception.
In San Jose and Santa Clara County, residential real estate sales prices continued to rise as the inventory of properties for sale shrunk. The home sales business tends to get the attention, but the rental market felt the effects of COVID-19 as well. Below are some of the 2020 rental housing trends that South Bay property management companies observed in San Jose and Santa Clara County.
Migration from downtown
One of the earliest-recognized trends related to the novel coronavirus was the move by people away from large urban centers and toward the outer areas and extended suburbs. And San Jose, the 10th largest metropolitan area in the United States by population, showed some evidence of that.
South Bay property management companies experienced lower rental rates as the overall San Jose market experienced a downturn, but demand was higher in the areas outside of downtown San Jose.
It’s a microcosm of what occurred nationwide in 2020, as urban centers saw vacancy rates rise by 1.4 percent in 12 months, while suburban areas across the country saw vacancy rates decrease by about 10 percent.
Overall, San Jose actually saw a slight decrease in vacancy rates for the year, starting 2021 with a 3.4-percent rate of vacancy, which is below the California average of 4.7 percent and half of nearby San Francisco’s vacancy rate of 6.7 percent.
Demand is driving rental rates
The year ended with the median rent for a two-bedroom apartment in San Jose at $2,653, which is well above the national average but down 11 percent from the year before. Overall apartment rents declined 11.7% in San Jose and 17.8% in Santa Clara County.
Rental properties in Willow Glen had a median monthly rental rate of $3,048. In the Erikson neighborhood, further south and to the east of Willow Glen, the median rate was $3,310. Closer to central San Jose, in the Garden Alameda neighborhood the median rate was $3,257.
Why so much demand?
The coronavirus wreaked havoc with the U.S. labor force in 2020, with national unemployment peaking near 15 percent in April, according to the Bureau of Labor Statistics. By the end of the year, however, unemployment dropped to 6.7 percent.
San Jose, meanwhile, ended the year at 6 percent, below the national average and a third of the California statewide mark of 9 percent. San Jose has a steady job market with high salaries and strong prospects for job growth. And where there are steady, well-paying jobs there is housing that people want and can afford.
The rental market is also affected by student housing, and there are several universities in the area that attract students from around the world. San Jose is unique in that students who are attracted to technology pursuits tend to stay after graduation because job growth in big tech continues to provide high-paying employment.
What’s in store for the rental marketing in 2021?
Nobody can predict when things will “return to normal” regarding COVID-19, but vaccination efforts would seem to indicate the virus will be less of a problem later in 2021. When it comes to the rental housing market in San Jose, it’s reasonable to expect the current eviction moratorium to end, and if the work-from-home trend sticks and more tech workers continue to work remotely, demand in desirable areas should still remain high.
Valley Management Group has been providing trustworthy and affordable property management in San Jose, CA, and throughout Santa Clara County for over 40 years. Contact us for a free property management quote and one month of services for rental owners who sign up for management services.
Reviewed and Approved by Lloyd Kipp
Property Manager and Owner of Valley Management Group