San Francisco Rents Hit Another Milestone Peak

San Francisco metro area residents paid record median rent in August, but there was a glimmer of good news: the pace of year-over year rent increases rose at the slowest pace since June 2014, Zillow said Tuesday.

The Zillow Rent Index for the San Francisco metro area stood at $3,313 in August, up 13.3 percent from August 2014.

That put San Francisco in second place nationally for highest median rent — surpassed only by the San Jose metro area, which had a Zillow Rent Index of $3,401 in August, up 9.5 percent from August 2014.

The San Jose area's 9.5 percent year-over-year increase in August median rent marked the first month the Silicon Valley metro area's year-over-year increase in median rent was below 10 percent since April 2014, according to Zillow data.

The Zillow Rent Index is the median rental value of all the rent zestimates in an area.

The Bay Area's slowing pace of rent increases reflects a national trend, which the Associated Press covered.

Zumper, a venture-backed startup focused on creating a more efficient apartment rental market, says the level of venture capital pouring into the region is a key factor in San Francisco's high rents.

Zumper pins one-third of San Francisco's rents on venture capital financings in the region.

"At the end of the day, we had an adjusted R-squared correlation of 0.83 for venture capital investment. It's very strong," Devin O'Brien, head of Zumper marketing told TechCrunch.

That will come as little surprise to those who managed not to sleep through their Econ 101 class. Housing costs have a strong correlation, if not the strongest, to job creation.

What's one of the first things entrepreneurs do when they get venture funding? Hire.

Hot Bay Area Housing Market Shows First Sign Of Cooling

Zillow's latest figures show that the nation's housing market is cooling off, even the white-hot Bay Area. The national housing market is slowing down, with home values showing the first monthly drop since the market began recovering four years ago, according to the real estate data company's report for July.

San Francisco, San Jose, Denver and Dallas are still tallying double-digit year-over-year home value increases, but even those hot markets are seeing a pullback in their pace of appreciation from June, Zillow said.

In San Francisco, July's Zillow Home Value Index stood at $756,100, up 0.6 percent from June and 11 percent higher from July 2014. In San Jose, July's Zillow Home Value Index was $891,500, up 0.7 percent from June and 11.5 percent from July 2014.

"This slip in home values is a sign of the times. Many people didn't think it was happening, but it is: we're going negative," Zillow Chief Economist Svenja Gudell said in speaking of the national housing market. "We've been expecting to see a monthly decline as markets return to normal.

"The market is leveling off, and it's good news, particularly for buyers, because it will ease some of the competitive pressure," Gudell said. (Note to loyal followers of Zillow's number-crunching: Gudell's predecessor Stan Humphries was promoted to chief analytics officer for Zillow Group.)

Zillow (NASDAQ: Z) expects that the pullback in June-to-July valuations in several cities, including Cincinnati and Washington, D.C., will spur home owners, who have been sitting on the fence pondering whether to sell, to finally put their homes on the market. That would help ease a shortage of available homes for sale that buyers have confronted over the last several months.

But the slower rise in appreciation, if not outright depreciation, will likely come as a shock to Bay Area home owners accustomed to robust growth in home values. Still, the key to home values will continue to be the pace of job growth.

Zillow says falling valuations and more homes on the market may spur renters to buy, especially given the dramatic increases in rents. San Francisco area rents jumped 14.1 percent to $3,285, according to the latest figures from Zillow. The company found that Bay Area rents can be quite painful, literally, as tenants skip doctor and dentist visits so they can pay the landlord