The dog-eat-dog world of Manhattan’s rental market is only getting fiercer as the busy spring real estate season kicks off, brokers say.
Manhattan rents reached an all-time high, with the average apartment renting for $3,418 a month in March, according to Citi Habitats, which released its rental market report Thursday. The real estate firm said the previous record was set in May 2007 when the average monthly rent hit $3,394.
The median net effective rent, adjusted for lease concessions, was $3,064 for the first quarter, a whopping 9 percent higher than last year’s first quarter, according to the report released Thursday from Prudential Douglas Elliman.
Though rising rents are usually an indicator of a rapidly improving economy, that’s not what’s happening now, said Jonathan Miller, a real estate expert who authored the Elliman report. Instead, rents are climbing faster than the economy, he said.
“Rising rents are a sign of real economic challenges remaining,” Miller said. “It comes down to credit.”
Mortgage rates may be low — making buying much more attractive to many New Yorkers — but banks’ underwriting standards have become “irrational,” Miller said, forcing “people on the margins” out of home ownership.
“It’s not a New York phenomenon. It’s a national phenomenon,” he said. “We are seeing increases in many urban markets across the country.
“We have a base of renters and people, who would organically move from rent to purchase, staying put,” he said.
Miller, however, believes there’s still room for the rents to go even higher before people feel as squeezed as they may have in the heady days of 2006. Back then, the median rent was $3,256 a month and the opposite scenario played out: credit was easy and sales were booming, so people were priced out of the market. Adjusted for inflation, today’s rent is 24.6 percent lower than then, he said.
But that might not assuage consumer confidence as incomes remain flat, Miller noted.
“Now, you don’t have a booming economy to put salve on the wound for much higher rent,” he said.
Miller believes that credit will remain tight for at least two years, which means that rents will not likely fall anytime soon.
“On the supply side, we don’t have too much coming into the market [for rentals],” said Yuval Greenblatt, an executive vice president at Elliiman. “It’s a good time to be an owner but not a good time to be a renter. Renters may not get as good an apartment as they hoped for.”
Gary Malin, president of Citi Habitats, said that renters have to be realistic, especially those coming to New York from out of town.
“Do I have to be in the West Village?” he said. “If I do, am I willing to live in a shoebox?”
Malin added that renters should be willing to put in paperwork fast, even if they haven’t done a lot of looking.
“Apartments are coming and going in hours,” he noted, “and the demand is only going to increase as we get into the spring season.”
Rents were up across the board as the vacancy rate remained tight at 1.22 percent, according to Citi Habitats, up slight from 1.08 percent last year. One-bedroom apartments led the pack with a 6.5 percent increase.
Malin suggested people look beyond luxury doorman high-rises and perhaps consider roommates, walk-ups, living far from transportation — or leave Manhattan altogether. A lot of his company’s clients, he said, are looking in places like Williamsburg, Brooklyn, or Astoria, Queens.
But there are still deals in Manhattan, particularly in neighborhoods like the east part of the Upper East Side along York Avenue, which is several avenues away from the subway.
“In Manhattan there are opportunities around every corner,” Malin said. “You just have to be willing to go to those corners.”
And renters can forget about concessions that were popular just a couple of years ago.
“Two years is like 20 years ago,” Malin said.