Significant Changes in San Francisco & Bay Area
A Paragon special report, June 2016
August 2016 Update
: After dropping in the first 6 months of 2016, employment numbers in San Francisco rebounded in July to hit their highest number ever. See third chart below, San Francisco Employed Residents by Year. Whether this is the beginning of another sustained burst of employment growth or a short-term fluctuation will become clearer in future months.
From the June 2016 report: Analyzing new data
(preliminary May numbers) from the CA Employment Development Department
indicates a significant shift in Bay Area employment numbers. As seen in the first
chart below, looking at the 4 central Bay Area Counties, comparing the first 5
months of last year to the same period of this year, the change
in the number of employed residents during each 5-month period went from an
increase of 28,100 last year to a decline of 5000 in this past December to May.
(Santa Clara County continued
to grow in number of employed residents, but at a substantially reduced rate
from the previous year.)
This is the first time since
2009 that the number of employed residents in this area has declined instead of
increasing during this period, though this is still relatively short-term data
and doesn’t prove a lasting, long-term trend.
These next 2 charts give longer-term
perspectives of year-over-year changes in San Francisco itself.
This first chart below, again, compares changes in
employed-resident numbers in San Francisco alone in the first 5 months of each
year. (Early 2010 saw a much greater increase,
+27,000, but was not included in the first chart for reasons of scale.)
This chart shows
long-term annual changes in employed-resident numbers in San Francisco.
Changes in employment
figures, up or down, typically affect the rental market relatively quickly and
dramatically - more so than the real estate purchase market - and that
certainly appears to be the case in San Francisco, where softening demand and
rents have been widely reported. The big increases in employment, and thus of
population, in the past 5 years put immense pressure on
rental rates around the Bay Area.
in employment we’re seeing in 2016 have also been coupled with recent, increased
rental inventory construction
, albeit most of which
has been at the very high end of rent rates. In other words, a possible significant decrease in demand is being coupled with increased supply of apartments available to rent.
Average asking rents have plateaued
over the last 3 quarters (first chart below), for the first time since 2011. This may disguise a decline in actual
which have not yet showed up in the statistics. Comparing the annual employment chart above and
the second, annual rent-rate chart below illustrates how employment numbers and rent-rates typically
move in parallel.
You might also find our market report from earlier in June of interest: Wealth,
Employment, Demand, Inventory, Affordability and San Francisco Home Prices
analyses were made in good faith with data from sources deemed reliable, but
they may contain errors and are subject to revision. It is not our intent to
convince you of a particular position, but to attempt to provide
straightforward data and analysis, so you can make your own informed decisions.
Statistics are generalities, longer term trends are much more meaningful than
short-term, and we will always know more
about what is actually going on in the present, in the future.
© 2016 Paragon Real Estate Group