Manhattan rents fell for the first time in over two years as the number of empty apartments increased and renters held out for price cuts, according to a report released Thursday, moving the scales on the balance of when renting is smarter than buying.
Of course, Manhattan rents are still the highest in the country — 11% higher than before the pandemic — despite the median rent in Manhattan falling 2% in November, from $4,095 to $4,000, according to the report by Douglas Elliman and Miller Samuel, Inc. Real Estate Appraisers and Consultants. The drop marks the first year-over-year decline in median prices in 27 months, according to the report.
The decline in Manhattan rents is important for both the housing market and overall inflation since Manhattan maintains its place as the nation’s largest rental market. And although renters and economists have been predicting a decline in Manhattan rents for over a year, tight supply and strong demand have pushed rents to record highs over the summer, holding steady into the early fall.
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Rather than cut listing prices, many landlords are offering concessions — although very quietly — like a month of free rent. The number of apartments offering concessions increased to 14% in November from 12% in October, according to Miller Samuel and Douglas Elliman. Sometimes those concessions amount to several hundreds of dollars each month.
Job cuts in the tech and financial sectors in Manhattan will very likely limit demand for rentals from new employees moving into Manhattan. Factor in falling mortgage rates and more renters may turn to buying.
Inventory also remains historically tight, just under the normal 3% level, according to Miller Samuel and Douglas Elliman. However, according to the Kiplinger Letter team, apartment vacancy rates will rise by the end of 2023. Vacancies fell nationally by 5% in the third quarter, up 0.% from a year ago. But the vacancy rate has risen steadily since the middle of last year, as supply now outweighs demand.
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