February 13, 2013
Wall Street Journal
Manhattan Rents Put Out the Welcome Mat
by Josh Barbanel
Renters who have given up the dream of an affordable Manhattan apartment may have a second chance: Average Manhattan rents declined in January for the fifth month in a row to the lowest level in about two years.
A market survey by broker Citi Habitats to be released on Wednesday put the average Manhattan rent at $3,211 a month in January, down 7.2% from the peak in August and 4.2% from the same month in 2012.
Brokers said the declining rents appeared to reflect rising buyer resistance to an 18.7% surge in Manhattan rents between January 2010 and last August, as the local economy rebounded from the financial crisis.
Faced with landlord requests for higher renewal rents, more and more renters have been looking around and finding better deals elsewhere. A market report by Douglas Elliman showed that the number of new rentals rose by 25% in January compared with the year-earlier month as tenants vacated more apartments.
“There always comes a point where people say enough is enough,” said Gary Malin, the president of Citi Habitats. “Tenants are fighting back and owners are starting to see apartments sitting on the market and they are lowering rents.”
But he said that the market wasn’t seeing “massive reductions” that would suggest a major turning point. The rate of decline had slowed, he said, and with few new rental buildings coming on the market, he predicted that rents could strengthen in the second quarter, a peak period for rentals.
The Citi Habitats report put the average monthly rent in Manhattan apartment at $1,989 for a studio, $2,673 for a one-bedroom, $3,832 for a two-bedroom and $4,914 for a three-bedroom.
Average rents in newer doorman buildings were considerably higher, ranging from $3,013 for a studio to $8,644 for a three-bedroom apartment.
Mark Menendez, director of Elliman rentals, said that with rents high some renters were taking advantage of low interest rates and buying instead, while others were looking for better deals at other buildings. “People are leaving apartments and looking for alternative places to live,” he said, “because they think the market is more competitive now.”
As rents rose last year, sales of smaller apartments, studios and one- bedrooms, which had lagged behind large units, picked up significantly, according to Jonathan Miller, an appraiser who prepared the market report for Douglas Elliman. “Falling mortgage rates really pulled people from the entry-level rental market to the entry-level purchase market,” he said.
David Cooper and a roommate rented an apartment on East 88th Street near First Avenue for $2,950 two years ago, and paid $200 more when they signed a lease renewal. When the landlord wanted another $200 this year, they decided to look around, he said.
Mr. Cooper, who works for a tech startup, was about to give up when he found what he called “an unbelievable apartment” at a good price: a ground-floor three-bedroom duplex apartment on East 81st Street, for $4,100 a month, that he planned to share with two roommates.
It came with a backyard, a huge washer and dryer. It was newly renovated, and was also across the street from three townhouses purchased by Madonna for $32 million in 2009.
Mr. Cooper’s broker, Christopher James of Citi Habitats, said many renters end up “modifying their expectations” as they go through an apartment search, but the drop in rents has for the time being given some renters “a good solid edge.”
In Mr. Cooper’s case, “The price was so low they are still asking what was wrong with the place,” Mr. James said. “You don’t want to get too excited because you don’t want to let the landlords know.”
Original Article // wsj.com
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