Manhattan Rents Fall as Much as 9 Percent Amid Employment Cuts

but perfitz told me my rent was only going up!

back to fixing toilets for him, i guess.

Vacancy up a whopping 0.15% yoy? Rents down a staggering 9% yoy?

My head is spinning.

s1 - you just proved my point.

And this is a real estate company doing the reporting - the real figures are likely far worse.

0.15%? I am shocked it's that low. That's not the impression I was getting elsewhere. May be a sampling issue given it's just Citi-Habitats, but they're pretty big, so it's unclear. Steve, prices have, in general, fallen more than 9%, so wouldn't you say many seller have indeed gotten the message? What's your angle?

sarcasm steve... this is a mere pothole compared the the empirical grand canyon we've chatting up for the past year. The numbers are far better than I would have expected.

for the 20th time, has anyone ever answered my question as to how vacancy rates are calculated? anyone know?

aboutready, it's a great question. I imagine there are some debatable factors that cause an apartment to be listed as "vacant" or not, but if the methodology is consistent, it's still quite shocking that it's essentially flat YoY, no? Unless an apartment has to be vacant for a full 12 months before being considered vacant (which I doubt is the case).

someone should clue my LL in.

I think you'll see rent decline more yoy starting November / December. Most October leases had already been signed in September of last year, when the crisis hit. Inventory didn't start to increase until March-ish, as I recall, as the layoffs began.

Of course these figures aren't as accurate as the ones taken by the Census, but those are only taken once every 3 years.

AR - Take the total number of apartments and subtract the total number of occupied apartments. Divide the result by the total number of apartments and multiply by 100.

spin, ha. no, is it reported by landlord? it's not like apartments for sale. obviously there is some shadow inventory even there, in that new developments don't put all their units on the market at once.

but what about all the new rental towers? are all the units which have never been released counted as vacant, even though they are finished and ready for occupancy? do all of the vacant apartments in PCV/ST count, or only the ones the ll has put on an available list? how can you in any real time sense accumulate data on how many apartments are vacant?

bjw, the methodology may be consistent, but if the gross number of units at issue is much higher, that seems to me to cause even greater distortions.

: )

I wouldn't trust it even if we had the source. Possibly CH's data on the buildings they represent is a fair enough sample with which to draw a general conclusion or do yoy comparisons.

Unfortunately, sellers haven't gotten the message yet.

Hey, sales prices are down a good 20% over the same period. More than keeping up with the decline in rents.

That said, I'd agree that we have further to go. Alot.

All in all, it's amazing how low Manhattan vacancies are relative to the rest of the country where a figure of 10% is common.

aboutready, they're using a sample - no way they can gauge the gross number of units available out there. I think you bring up a good point on the newer rental towers - does CH list with (m)any of these places? If not, that might skew the rate down.

Rents are down 25% from the peak, which was the end of 2007 - not from October 2008. We'll have to wait to see the effect of last year's market carnage on rents.

Can you document this?

The documentation for the 25% reduction (25% to 30%) is common knowledge, I'm quoting Jonathan Miller, and the link has been posted many times.

The start of the rent decline was from TREGNY. In this case the methodology is not the same as Citi's, but if you look at their reports I think you'll see September 2008 as the peak of rental prices. Rentals were going up even after purchase prices were coming down, because the latter had climbed too high to be affordable.

Rents started their collapse in October / November of last year. I also know this in my personal experience as my rent went up, but two months later identical apartments were offered for $800 less a month.

I saw the stats on rents down 17% peak to trough a few months ago... and it was posted here... and the one off reports have all said continued declines. So, I'm pretty comfortable saying 20%, though I haven't seen the 25% or 30% official number yet, but I would not be surprised if the data already says it.

steve, the documentation for sales prices down 25% is there, but not for rentals. According to the link you posted, it's 9% from peak - again, a bit surprising it's that low. Where is the 17% (or more) report? Haven't seen it.

I've had trouble finding the TREGNY document you reference. Would be pleased to get hard documentation - not that I'm questioning your veracity.

this is on-point. i think it's virtually impossible to track rental prices and vacancies in NYC real time. i think it's one of the least transparent markets available.

http://therealdeal.com/newyork/articles/rental-report-wars-which-one-is-most-accurate

tregny has October 2008's report here:

http://www.tregny.com/content/rental_market_reports/october-2008-manhattan-rental-market-report/

you'll have to search on other streeteasy threads for prior reports. There is a lot of fluctuation in monthly reports, as might be expected.

bjw - read again what I wrote: it's exactly what you're saying.

Sellers are going to get the message as people realize it's cheaper to rent than own. I keep looking at condos via open houses and online and when I do the math I am better off renting in these overpriced condos(which I currently do). The closing costs, maintenance, taxes(going up) make buying not very attractive. Yes mortgage rates are low but how long can the gov't artificially suppress them? Gold prices indicate inflation is coming. Unemployment not looking to get better anytime soon. I think I'll wait.

Thanks, Steve.

Alas, I still don't see that 25% decline.

The October 2008 report references October 2007 prices.

Just using doorman one-bedroom Manhattan apartments as a basic series:

October, 2007: $3,787
October, 2008: $3,282

-13.3%

I know things like "one-month's free rent" are often bandied about - and "no-fee." But I've always found my landlord is more receptive to hard numbers than anecdotal ones.

Trust but verify.

Oops, October, 2008 should read October, 2009.

Topper, can't you piece together 25% from the 2008 and 2009 YoY changes?

Never mind then -- looking at the 2008 TREGNY + the 2009 CH, I guess one can piece together 15-20%. I would guess that in aggregate, the remainder is in free months, so I doubt you'll find hard numbers at 25%.

Manhattan Doorman One-bedroom (per TREGNY)

October, 2007: $3,787
October, 2008: $3,665
October, 2009: $3,282

Still down 13.3% for the full period.

Don't get me wrong - I wish it were 25%. But I just don't see it.

Topper, I guess I'm not clear! The 25% is for PURCHASE PRICES, not rents. Rents are down less, but they started falling later.

Regarding vacancy rates, the increase may seem small but is actually huge and is what's driving the big drop in prices. In 2006-2007 (according to the CH Black and White Report), vacancy rates were sub-1% (however they were measured). They are now double. If Manhattan vacancy rates were at 10% like the rest of the country, you'd find high-end 1BRs for $1000-$1500 like the rest of the country as well.

The market dynamics of a sub-1% vacancy rate are quite fascinating. In Silicon Valley during the tech bubble, a typical fine-but-not-fancy 700 sq ft 1BR in a large complex with lots of comparable units went from $1400 one year to $2100 the next year back down to $1400 the following year. Mind you, this was not in San Francisco, but in the middle of non-descript suburbia. Why? Vacancy rates went from a few percent to sub-1% back to a few percent. At sub-1%, the marginal supply vs. marginal demand characteristics really get skewed in a crazy way.

Manhattan hasn't seen anything like that because vacancy rates have historically been and continue to be low, so the market dynamics don't appear as extreme. However, if we see vacancy rates like 5%, I would guess that would be accompanied by an additional drop in rental prices of 30% from here. I.e., that 1BR that was renting for $3500 a couple of years ago would drop from the $2500 of today to $1500-$2000. No predictions on that happening, just saying...

There are plenty more falls coming, inonada - inventory of new dev. rises, no one to buy it, they have to do SOMETHING with it. Still plenty of construction out there.

I'm going from just over $4600 a month to just over $3600 a month for 50% more space. But my current landlord wouldn't negotiate, so I just up and left. As did a lot of my neighbors - vacancies are historically high.

I'll make back the cost of moving in 2 months. I signed a 2-year lease because they let me extend the 1 month free prorated to 2 years. After that I expect it will stay the same or go down more.

k.

"Rents are down 25% from the peak, which was the end of 2007 - not from October 2008. We'll have to wait to see the effect of last year's market carnage on rents."

the reports are all over the place, and generally do not account for concessions.

http://therealdeal.com/newyork/articles/new-rental-data-from-prudential-douglas-elliman-and-jonathan-miller-of-miller-samuel-shows-60-drop-in-deals

The report, which tracked data about the rental market that has never before been published, determined that 2,346 apartments were rented in the second quarter of 2009, down from 5,624 during the same quarter of 2008. That drop coincided with a 17.5 percent decrease in the average rental price per square foot to $44.16, from $53.50 in the prior-year quarter.

It'll be interesting to see what your old apartment ultimately rents for, Steve.

I just received an e-mail from my LL requesting that I respond with what I consider a fair rent and he would "consider" my request. Is 20% too much..he'll never agree to it but what the heck...also, should i mention the supreme court ruling since my apartment was a rent stabl. one with the tenant paying $660.00 before they raised it to $2500.

Sure, Julia, why not go for gold? Although I might hold off mentioning the rent stab issue and keep that in your back pocket if the landlord decides not to negotiate. I'm about out of the house now but happy birthday, we'll miss you this evening, and I'll get you a belated birthday drink at the next meetup.

Topper - sorry, my bad. I meant "prices are down 25%"

In fact, that's what I thought I'd written. OH WELL!

My old apartment (that I'm sitting in) is rented, but I don't know for how much. I assume around $4,200.

Still overpriced.

Julia, go onto nybits.com & find a comparable in your area. It's as simple as that.

The fact that they went from a huge increase to "considering" a decrease indicates that they're willing to do a deal.

stevejhx..good idea, evnyc..i'm holding you to that drink...have a great meetup tonight.

Julia, I don't think 20% is too much. I know of a few examples where that's where things ended up, myself included. Honestly, if you want to end at 20%, you might need to start at 25-30%. The only way you'll feel comfortable doing that is to really look at the market seriously so that you can see your other options if the landlord doesn't agree. Otherwise, you'll be chicken and won't take your goal of 20% off seriously.

How much are you paying, how big is your place, where is it roughly located, and how fancy is it / how good a views? I'm sure people on this board can try to give you an idea of what the market is at on whatever you have.

"That drop coincided with a 17.5 percent decrease in the average rental price per square foot to $44.16, from $53.50 in the prior-year quarter."

bingo.

I'm paying $2500 for a non-doorman studio/very small one bedroom...the previous tenant paid $660.00

bulls?

Julia,
Can you explain in detail what is this Supreme court ruling about ?

On the rent stabilization, have you looked up J-51 on your building yet? If it's not there, then stop worrying about it. Also realize that the previous tenant probably lived in much crappier conditions than you, probably didn't buy a place 30 years ago because of the rent control, and probably missed out on several hundred thousand dollars of appreciation. Don't worry so much about what the last tenant paid, and worry more about what you are going to pay.

By non-doorman, I take that to mean not fancy at all? That doesn't necessarily need to be the case, just asking. Are views particularly nice? What size in terms of square footage?

Here's a 550 sq ft studio in a pretty new luxury building (2006) in a decent part of town, asking $1900 but probably negotiable as it's been on the market for 4 months, for example:

http://www.streeteasy.com/nyc/rental/546762-rental-120-riverside-blvd-lincoln-square-new-york

> I'm paying $2500 for a non-doorman studio/very small one bedroom

For $2500 after the free month rent, you can get a one bedroom, decent size (though one of their smaller ones), in one of the "luxury" towers on 6th ave in the 20s... they have a LOT of inventory they need to get rid of.

julia, for your comps, this is a brodsky studio but it's in bridgetower for f's sake. $1895.

http://www.streeteasy.com/nyc/rental/587070-condo-401-east-60th-street-lenox-hill-new-york

sledge, are you being mean? if not, there are numerous threads on the PCV/ST Court of Appeals ruling.

I'm not being mean at all, i didn't know the supreme court ruling was related to the PCV/ST case...

sorry sledge, it's not a supreme court case. it's a NY court of appeals case. haven't seen you around recently, it's been quite the topic, but maybe i just focus more because i live here.

Yeah, Supreme Court in New York is the court of general jurisdiction. It has an appellate division, which is then appealed to the Court of Appeals.

Julia, so sorry, but you whine a lot. If it's not this, it's that. How's about pulling yourself up by the bootstraps, and just finding a decent place to live?

Where's Juicy? I remember his prediction that rents would be going up, and that's what he used to justify unjustifiable real estate prices. And where's LICC? Remember how he said that "rents never go down"?

LMAO.

There goes steve, making things up again. I never once said that rents never go down. I said that rents go up over the long term.

So in the context of the worst economic conditions in decades and a major hit to the NYC job market, rents only fell less than 10% in a year? Impressive . . .

"I said that rents go up over the long term."

So does everything else. Proving - yet again - the stupidity of your comments!

"rents only fell less than 10% in a year?"

How much did your mortgage fall? Your property taxes? Your common charges?

OH! THEY WENT UP!

Oh, LICC - my new rent is 22% less than my old rent for 50% more space. Not only were there no transaction costs, I actually get back a net $1,000 in security deposit. The $2000 moving expense is recouped in 2 months.

Hmm. Had you not stuck yourself with an albatross of an apartment in a marginal building in a marginal neighborhood - desolate, better said - you'd be able to take advantage of these deals, as well.

Of course you can't, because you can't rent your place out to an unrelated third party and come close to breaking even.

But you do get the TAX BENEFIT!

LMAO.

What is your rent compared to 5 years ago? 10 years ago? Keep trying to pretend you are better off than if you had bought your place (chuckle).

So your old place was only 700-750 square feet? You were paying $4400 per month for a 750sf apartment and you are bragging about that?? HAHAHAHAHAHAHAHAHAHAHAHA!!

I'm in a great building in a great neighborhood, and in 5 or 10 years from now, my monthly mortgage payment will be the same, while your rental cost will be significantly higher.

"So does everything else. Proving - yet again - the stupidity of your comments!"
"How much did your mortgage fall? Your property taxes? Your common charges?"

What? No. It's not a stupid statement. It's true, rents can fall, but your implications about the rest only going up are steeped in falsehood, Steve. Mortgage payments? Can go down with a refi, which has been happening a lot in the past year as rates have crept ever lower. Property taxes? You (or your management company) can negotiate what the assessed value of the property should be, and thus have a shot at lowering your property taxes. It's rare, but don't pretend that it's impossible. Same is true for common charges - assessments expire, energy costs go down (as has happened), cheaper alternatives for amenities, etc. Not something I'd necessarily advise since it's good to build strong reserves, but it can be done. Note, I'm not advocating buying here, but you're so doggedly one-sided that you distort the facts from time to time and have some kind of obsession with attempting to belittle LICC (and JuiceMan). It's weird and unhelpful - wish you would drop it.

steve, beside bjw's point, you just make yourself look stupid over and over again. You really should try just stating your case, respecting others, and stop getting so personally nasty. All you are doing is making yourself look like a guy who is out of control and who does not know what he is talking about.

"What is your rent compared to [...] 10 years ago?"

Essentially the same in nominal terms: the going rate for a 1-bedroom 10 years ago was $1,700 a month. Twice the space, better building, now $3,600. Adjusted for inflation & my income, significantly lower.

"So your old place was only 700-750 square feet?"

No - it was about 950. The 50% includes the two balconies I have not counted in the square footage.

"HAHAHAHAHAHAHAHAHAHAHAHA!!"

"in a great neighborhood"

Long Island City? Please. I can ALMOST believe you're in a good building (there are a few), but LIC is desolate.

That Duane Reade in yet?

"and in 5 or 10 years from now, my monthly mortgage payment will be the same, while your rental cost will be significantly higher."

You have no way of knowing that. Add in your taxes and common charges, and your lost principal as prices collapse another 50% (more in marginal nabes like LIC), & you'll be underwater.

"Can go down with a refi, which has been happening a lot in the past year as rates have crept ever lower."

Factor in all of the transaction costs and the refi costs, amortize them over the time you hold the property for, and you'll see that it takes about 7-10 years to recoup the charges. It's not that viable an alternative.

Do the math.

"Property taxes? You (or your management company) can negotiate what the assessed value of the property should be, and thus have a shot at lowering your property taxes."

LICC himself said they never go down.

"Adjusted for inflation & my income, significantly lower."

Why are you adjusting for your income? I've never seen this done before. If you're going to adjust for income, it should be a mean/median increase in wages for the area. That's a very self-serving trick, especially if your income grew considerably in those ten years, something it's not likely to do repeatedly over the decades in your working and non-working life.

"but LIC is desolate."

We know, it's not paradise. But it's not a bad neighborhood either. Get over it.

"and your lost principal as prices collapse another 50% (more in marginal nabes like LIC), & you'll be underwater."

Wait, so you're saying prices will fall at least 75% from peak now? Aggressive. And how do you have any idea about LICC's mortgage? You really think he'll be underwater in 10 years? You have no basis for that, really.

"Factor in all of the transaction costs and the refi costs, amortize them over the time you hold the property for, and you'll see that it takes about 7-10 years to recoup the charges. It's not that viable an alternative.
Do the math."

BS, Steve. You have no idea what the initial rate would be, so you can't make such a grand proclamation. Many people refi and save money as a result. I'm sure there are plenty of instances where you're correct because people aren't doing the math, but don't be so willfully ignorant.

"LICC himself said they never go down."

I don't really care if he said so, and I'm sure you don't either. Fact is, you're mistaken on that point.

steve commonly resorts to ridiculous future predictions and making up facts and lies about things I have said to try to defend his comments. Sad.

Which part didn't you say, LICC?

I didn't say things never go down.

Another of steve's misconceptions is his statement above that rents are down 22% based on his situation, where he is moving to a different apartment in a different building in a different neighborhood. By his own admission, his existing apartment is being rented at just 5% less than what he was paying. Of course, steve hates comparing apples to apples when it contradicts his argument.

I've gone back through prior TREGNY monthly reports and it looks like rental prices peaked out in September, 2007. By my calculations about six months earlier than sales prices peaked out (JM).

I use a Manhattan doorman one-bedroom apartment as my benchmark.

September, 2007: $3,881
October, 2009: $3,282

-15.4%

I'm guessing you can often add one-month's free rent to this in which case you could get to -23.7%. In some cases the landlord picks up the broker's fee.

Thanks, Topper. Disproves LICC (yet again).

"his existing apartment is being rented at just 5% less than what he was paying."

I THINK that's what they're getting, but I'm not sure. They just lowered the asking price of another unit in this line - there was a slight tightening of the market in May of this year.

Where my current landlord is screwed is in studios and 1-bedrooms: there is a huge surplus of them. 2-bedroom 2-bath units are somewhat in demand.

And no - it's not "apples to apples." My new unit is much better: 2 bedrooms, 2 bathrooms, 2 balconies, Hudson River views, 21st floor.

Much, much better!

stevejhx...can you tell me where your current bldg. is or if you know what the LL is asking for studio/one bedroom...thanks.

julia - nybits.com. Avails. from my old & new building are both listed there. NO FEE!

LICC should share some info on his great LIC purchase, so we can see how much of his equity he's already lost, and how much is yet to come.