Rental Property Trends in San Jose and Santa Clara County

Rising mortgage interest rates throughout 2022, combined with some economic uncertainty, helped finally cool the blazing-hot residential housing markets nationwide. Even in a seller’s market such as San Jose, home sales prices flattened at least a bit.

What didn’t cool off were the rental markets in most areas of San Jose and Santa Clara County. It stands to reason that as home buyer demand decreases, the demand for rentals increases. That was certainly the case during the past year or so.

And some factors in the area’s residential housing markets appear poised to stick around for a while. Here’s a look at San Jose and Santa Clara County rental property trends during the last year.

Rental Rates are Up Considerably

In February of 2023, the median rent for all properties in Santa Clara County was $3,395, according to data analyzed by Zillow. That figure is up $395 from February of 2022, when interest rates started to cool homebuyer demand. The current median rent is down from a peak of about $3,573 in the fall of 2022, but a 13-percent year-over-year increase is still notable.

In some areas, the increases are even steeper. For example, a Cupertino property management company could show you that rents there have climbed to a median of $4,000 in that city. That’s well above the median for all of Santa Clara County, and it’s a 15-percent year-over-year gain of $522 per month.

What Affects Rental Rates?

Rental rates are primarily a function of supply and demand. People will always need a place to live, and when fewer people buy homes, more renters are in the market. And vice versa: More homebuyers usually mean there are fewer renters.

On the supply side, in February 2023, there were only about 1,100 rental vacancies in San Jose. When more renters are in the market than the vacancy rate can accommodate, rental rates tend to rise.

Keep in mind, too, that rental rates can vary greatly depending on the size of a unit. The median rent in San Jose was $3,153 per month in February, but the median for a one-bedroom apartment was about $1,000 lower. Meanwhile, a three-bedroom single-family home had a median monthly rent of $4,000.

Economic Conditions

Much has been made of a possible looming recession, inflation, and a stock-market slump that has eroded the buying power of those with valuable stock options, particularly in the tech-heavy Silicon Valley.

But even with the oft-publicized tech layoffs of late, Santa Clara County remains a housing market with generally high incomes and low unemployment. According to the U.S. Bureau of Statistics, unemployment in Santa Clara County was around 2 percent at the end of 2022, still below the already-low national average. It remains a high-earning, highly employed area.

That would be considered great news if you are a rental owner and/or involved in San Jose property management. If economic uncertainty curtails the number of prospective homebuyers, the pool of renters could grow larger. What you might end up with, then, is a group of potential tenants with reliable income, who – especially if they feel as if they face job uncertainty – are more inclined to rent rather than buy a home. Just about any time the pool of qualified renters grows, rental owners win.

Property Management from Valley Management Group

Valley Management Group is a San Jose Property Management Company that has been providing full-service property management to rental owners for over 40 years. They manage all the day-to-day responsibilities and time-consuming things necessary to manage properties for rental owners. If you own a rental property in San Jose or Santa Clara County, contact Valley Management Group for a free property management quote and one free month of property management services.