Median rental prices in Manhattan increased to their highest level for a December month and the number of new leases fell as contrasting numbers were recently reported from the real estate market.
The average rental price went up 0.6 percent monthly and 12.9 percent yearly to reach $4,440, and the more-widely monitored and reported median rental metric, including landlord concessions, increased 0.7 percent monthly and a significant 21.1 percent yearly to record $3,392 in December, according to a December report by real estate appraisers Douglas Elliman.
“However, the market remains extremely polarized, with the net effective median rent for a doorman rental up 7.7 percent but down 6.6 percent for a non-doorman rental, respectively, compared to the same period two years ago,” said the report.
Median rentals, without landlord concessions, went up 16.0 percent year-on-year, while vacancies reduced 9.25 percent. There was a decrease of 38.9 percent in new leases, excluding renewals, from 5,459 in 2020 to 3,335 indicating lesser demand. The vacancy rate fell drastically from almost 11 percent in 2020 to 1.70 percent suggesting that renters are renewing their leases, which means fewer options for new home seekers.
“The market share of two-year leases was 51.3 percent, significantly above the 16.7 percent record low in January as tenants locked in longer leases in anticipation of higher prices in the future.”
While most landlords prefer sticking with the current tenants and avoiding disruptions seen in the last two years, with the increase in rents, some tenants are getting priced out of the market.
The start of the pandemic saw people moving out of big cities but with the recovery, many are returning. In 2020, there were more than 25,000 apartments ready to be rented out in Manhattan, based on data from CNBC.
Although real estate consultants claimed there would be a years-long recovery, the recent price hikes are pointing to a rapid and steep recovery with some rents crossing pre-pandemic levels. The increase in demand has pushed up prices and tightened supply.
“What started as a trickle earlier last year has become like a geyser of demand,” Janna Raskopf, a leading rental broker in Manhattan with Douglas Elliman, said to CNBC. “I’ve been doing this for 14 years and it’s absolutely unprecedented.”
However, the number of days a property stays on market from the day it is listed has gone to 61, an increase of 20 days from 2020.
The average rental prices for studio, 1-bedroom, and 2-bedroom apartments have gone up 20.2 percent, 17.2 percent, and 18.1 percent yearly to $2,765, $3,620, and $5,432 respectively. One-bedrooms cost 2.1 percent less than in November when it was $3,698.
As workers start returning back to offices, and college graduates begin relocating to job markets, demand will get higher. New properties opening up could ease some of the tight supply but houses are expected to get pricier as the economy opens up further.