June month saw apartment rents in Manhattan touch a record high as more pain is expected for prospective tenants as the market heads into a competitive season.
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According to Douglas Elliman Real Estate, a brokerage firm, and Sam Manual Inc., an appraiser firm, the median rental was $4050 for new leases signed last month. The rent surpassed May by $50, a 25% hike compared to a year ago. The average rents were skewed by expensive deals that surpassed $5000 for the first time.
Analysts and agents expect rents to rise further in July and August. These months are the busiest as students and fresh graduates get together with families and look for new apartments before school starts in September. This year the season coincides with an already torrid market as the post-pandemic saw re-influx into the cities by apartment seekers and landlords trying to make up for their losses suffered during 2020 and 2021.
Brokerage Firm Compass Leasing Director Julia Segal said that rising mortgage rates have contributed to demand for rentals due to a decline in home contracts. The renter pool is increasing because high-interest rates have turned home buyers into renters.
According to Douglas Elliman and Miller Samuel, apartment listing time has fallen from 87 days in June 2021, 52 days in May, and 50 days last month. Executive manager Hal Gavzie of Douglas Elliman said that renters are applying for units without visiting them as competition heats up. Gavzie instructs his agents to discourage this but understands that renter is frustrated at how the apartment is rented out so quickly.
Apart from Manhattan, similar factors are at play nationally. Rents have surged quickly since 1986 and pushed inflation to a record high in four decades. The consumer prices report released by the labor department last Wednesday revealed rent for primary residences was higher by 0.8% compared to May and 5.8% over the previous year.
In September, slight cooling off is expected in Manhattan though prices aren’t likely to plummet. Jonathan Miller of Miller Samuel says there are higher chances of rentals plateauing than going down. Though the current rents do not look sustainable, there is also no reason for them to decline unless there is a recession.
The good news is that monthly gains have slowed down for effective net rents. This is what tenants pay after deducting landlords’ concessions. The median rose 1.3% in June compared to May, 1.9% in May, and 6.2 % in April. These points toward rent are topping out.
In the past seven months, the vacancy rate in Manhattan has been below 2%, much lower than the peak of 19% during the lockdown and close to average for three years since February 2020.
Gavzie says demand continues to be strong, and with tight inventory, Landlords are in the drivers’ seat as they push the rents higher.
