Rents Are Way Up
If you stuck around New York City in the throes of 2020 and 2021 odds are in favor you were rewarded with more affordable rent. To some that meant living in the neighborhood of their dreams and to others it meant a rent reduction of 20%. Those days have passed.
While rent renewals with increases of 20-30% make for a highly shareable Tik Tok clip it’s a day that certainly isn’t surprising for an inherently supply-constrained city like New York. To investors it’s a clear signal that Manhattan remains a highly desirable place to live, work, and play despite the low rates of return so far to the traditional office. To renters, it creates the impetus to move away from the city center into more affordable neighborhoods.
Average monthly rent for a Manhattan apartment surpassed $5,000 (Miller Samuel)
Year over year asking rents are up 33% in June 22 for rentals versus 12% for resales
Expensive lease renewals in Manhattan are forcing residents to Brooklyn and Queens and causing higher rental demand and prices in the outer boroughs
30-year fixed-rate mortgage averaged 5.30% in the week ending July 28, down from 5.54% the week before (Freddie Mac).
The rising costs of rental housing is a policy challenge for New York City that may have been exacerbated by the changes in the 2019 rent laws. Without incentives for Landlords to renovate and upgrade rent stabilized housing we’re seeing many ‘warehouse’ their vacant units while waiting for updates to the law. In May, the city’s Department of Housing Preservation and Development released a figure that there are nearly 43,000 vacant but unavailable units. Additionally, we just saw the expiration of 421a which will crimp demand for development sites and reduce incentives for developers to construct new housing. By cutting off avenues for new supply it’s natural for the cost of rental housing to remain high.
I would argue that in a softening sales market and a hot rental market that the delta between buying and renting has shrunk. Savvy buyers we’re representing are borrowing against their portfolios to secure lower interest rates or paying with more cash as a workaround to keep their monthly payments in check. They recognize that inflation will continue to put upward pressure on the cost of renting housing so securing a stable monthly payment that’s less subject to fluctuation is paramount.
Ready to walk through your options in this evolving marketplace? Please reach out anytime and check out my webinar here for Preparing for a Home Purchase in a Cooling Market.