2 new reports says real rents up in Manhattan

I should say three reports: REIS, Prudential's Jonathan Miller, and Citi.

jason, I think we can dismiss the Citi Habitats report - its methodology is pretty terrible. As for Miller Samuel, rents are up 3.5% YoY, nominally. He also says this:

"Even with the quarterly increases, Mr. Miller contends that average rents still haven't returned to the levels of 2006. He said tenants were paying an inflation-adjusted $4,793, on average, during the fourth quarter of 2006."

That's pretty much exactly what I said in another thread on this topic [patting self on back].

You did not read his ACTUAL report. Net of concessions, price per square foot is up 11.8% YOY. That is not a little bit.

And my point was not the magnitude of the increase, or whether we are back at peak levels, inflation adjusted or otherwise - its that we are (and have been) up YOY for many months in a row. Indonada keeps cherry picking anecdotes to claim rents are NOT up YOY. They are. These three reports plus TREGNY plus the CPI data for New York all say so. Net of concessions.

If they are up 0.01% YOY, I am correct.

And 11.8% per square foot is a lot.

Also, Miller says the # of new rentals with concessions was 60% of the total last year. 36.8% last quarter. 3.4% in 2Q.

And my favorite for Jim Jones the idiot broker is that its not "prime" Manhattan driving this, per J Miller. On a PPSF basis, rents are down YOY downtown, up 7.6% YOY on the East side, up 12.1% YOY on the West side, and up 23.4% YOY Uptown.

No, I looked at the report: (http://assets.prudentialelliman.com/NYCPhotos/retail_reports/rental_q2_2011.pdf)

I think the most relevant bit is that we are still just below 2006 levels. Average rental concession is 1.2 months of free rent. Last year it was 2.0. Meh.

jason,what alternate reality do you inhabit in which the uws/ues isnt prime manhattan? douchbag

how do broker's fees work??

wouldn't effective rents actually be higher if included?

since they're all over the place - 1 month fee, 15%, 10%, no fee, i assume they're not included??

"Average rental concession is 1.2 months of free rent. Last year it was 2.0. Meh."

But 95% fewer listings are offering concessions at all.

"how do broker's fees work??"

If a LL pays the fee, that counts as a concession.

Renters live at the mercy of the landlord. Unless you are benefiting from a gov't hand-out via rent stab/control, your good rate is only valid for the lenght of the contract. This is one very important reason to buy. Too many of the Rent vs buy arguments only look at current rent or base their rental inflation rate on the last year or two's data.

It's not a stretch to assume that 3 years of high single digit rent increases will push many people toward buying.

"If a LL pays the fee, that counts as a concession."

good to know, and if renter pays fee? it's not picked up in stats?

ie 5k rent 1 year at 12% broker fee no concessions, renter pays broker fee..

contract shows $5,000 rent/month

effective rent is actually $5,600 ...

since $5k is listed as rent on contract, i assume that's the listed rent??

"It's not a stretch to assume that 3 years of high single digit rent increases will push many people toward buying."

Rents going up increases the value of property, all else equal, so if rents go up purchase prices go up. Its a circular argument.

And no, renter paying a fee is not in the stats. Why should it be?

Property prices are ~06 levels as well. I don't even think that's accounting for inflation.

Again, my point is YOY increases. No one here is arguing about 2006 prices, unless you are aguing with yourself.

From Jonathan Miller on YOY rent increases:

"“A significant portion of those gains are because the landlord is not as worried about tenant retention and vacancy, Miller said. “There is no category that you can say that rents are cheaper than last year. It’s just not happening.”

Landlords saw almost no need to offer concessions such as free rent to lure tenants in the second quarter. Incentives were included in about 3.4 percent of deals signed, compared with 60 percent a year earlier, Miller Samuel and Prudential said."

http://www.bloomberg.com/news/2011-07-08/manhattan-apartment-rents-jump-7-as-landlords-end-concessions.html

Ok, so June 2011 rents appear to be marginally higher than they were in June 2010 (just over 3% according to Miller). That's a nice point. But isn't the larger (more meaningful) one that rents are actually lower than they were 5 years ago?

landlords and tenants live at the mercy of the market--if a landlord is too merciless, and disrespects market valuation, his properties go unrented--that's why my LL reduced my rent when my lease renewed at the end of 08--and he kept it flat when it renewed again 2 years later--we negotiate and both consider the market--he has the power to force me to move--i have the power to force him to spend money on updating, painting, advertising and missing out on at least one month's rent, and potentially more if my estimate that he seeks to overcharge relative to the market is correct

if rents go up, obviously prices do as well--ever heard of substitute goods?

Riversider...that has always been my concern...i'm always worried what the LL will do when my lease expires.

"i have the power to force him to spend money on updating, painting, advertising and missing out on at least one month's rent, and potentially more"

Bottoms, I actually agree with you up to this point. How can you force a landlord to spend money on updating and painting?

Average rental price from Miller Samuel:

Year Quarter Studio 1 Bedroom 2 Bedroom 3 Bedroom 4+ Bedroom All
2011 2 2,163 3,036 4,456 6,688 10,548 3,465
2011 1 2,269 3,008 4,644 7,485 12,321 3,445
2010 4 2,319 3,069 4,722 7,558 12,941 3,499
2010 3 2,306 3,053 4,414 6,851 9,903 3,460
2010 2 2,268 3,159 4,945 8,024 10,290 3,710
2010 1 2,417 3,094 5,021 8,653 12,197 3,812
2009 4 2,253 3,026 5,228 7,515 12,749 3,789
2009 3 2,252 3,026 5,048 7,603 12,925 3,759
2009 2 2,304 2,874 5,018 8,849 15,430 3,839
2009 1 2,221 3,200 5,375 8,760 15,670 4,142
2008 4 2,294 3,245 5,257 9,378 18,825 3,958
2008 3 2,441 3,344 5,139 8,676 26,172 3,796
2008 2 2,449 3,311 5,250 9,564 16,814 3,806
2008 1 2,388 3,281 5,297 9,287 27,461 3,850
2007 4 2,315 3,303 5,272 7,846 13,527 3,801
2007 3 2,282 3,308 5,122 8,035 12,378 3,757
2007 2 2,257 3,313 4,895 8,016 13,655 3,704
2007 1 2,261 3,276 5,116 8,209 17,183 3,762

Median:

Year Quarter Studio 1 Bedroom 2 Bedroom 3 Bedroom 4+ Bedroom All
2011 2 2,075 2,995 4,095 5,295 6,675 2,896
2011 1 2,200 2,970 4,300 5,998 12,000 2,895
2010 4 2,250 3,000 4,395 5,435 11,500 2,950
2010 3 2,195 2,950 4,250 5,233 6,195 3,000
2010 2 2,100 3,000 4,499 6,698 9,100 3,000
2010 1 2,048 3,000 4,645 6,829 12,500 3,100
2009 4 2,100 2,850 4,700 6,588 11,500 2,900
2009 3 2,000 2,895 4,700 6,800 12,000 2,950
2009 2 2,000 2,795 4,550 7,673 14,700 3,100
2009 1 2,150 3,000 4,995 7,850 14,500 3,300
2008 4 2,295 3,185 4,700 8,000 20,000 3,200
2008 3 2,395 3,250 4,795 7,145 22,500 3,195
2008 2 2,450 3,220 4,795 8,000 15,000 3,200
2008 1 2,350 3,195 4,948 8,000 23,500 3,200
2007 4 2,300 3,200 4,995 6,695 12,500 3,200
2007 3 2,295 3,250 4,895 7,250 10,500 3,200
2007 2 2,275 3,220 4,630 6,530 13,625 3,195
2007 1 2,250 3,195 4,800 7,500 12,900 3,264

inonada miller samuel forcefield ON

On the effect of concessions:

1) They were conveniently missing in the 2009 reports. Gotta love adjustments that get trotted out selectively.

2) The numbers seem somewhat pulled out of a hat. You'll note that the Q2 2010 conceasion-adjusted numbers are _exactly_ 0.9 the non adjusted numbers, which is exactly 60% of 2 / 12 months.

3) Even taking the concessions at face value, I think applying them on an annual basis is wrong because no one gets them the second year, strong or weak market. I personally amortize over 3 years as that is the average length of stay. If your broker fee was paid, you're an idiot if you assume a LL is going to float you 15% of rent in the 2nd year just for hanging around.

So with the concessions as given by Miller Samuel amortized over 3 years, we have:

1) Average down 3.5%.
2) Median exactly flat.
3) PPSF up 4.3%.

So very mixed results in the context of 3.6% CPI inflation since last year.

This is what rapidly-rising rents look like:

2006 4 3,874
2006 3 3,607
2006 2 3,436
2006 1 3,381
2005 4 3,341
2005 3 3,100
2005 2 3,112
2005 1 3,179
2004 4 3,200
2004 3 3,002
2004 2 2,989
2004 1 3,095
2003 4 3,097
2003 3 2,924
2003 2 2,973

We'll get there again, no doubt.

Wow ... Jim's tropical gibberish is just like his "temperate" gibberish.

"How can you force a landlord to spend money on updating and painting?"

You move.

"if rents go up, obviously prices do as well--ever heard of substitute goods?"

That would be mostly true if price/rent multiples were at relatively normal levels. Since it's currently not normal, I would expect to see a stretch of time where rent increase out pace price increase. Buying simply won't be an option for more and more people even when buy vs. rent analysis starts to lean in favor of buy in the future

"It's not a stretch to assume that 3 years of high single digit rent increases will push many people toward buying."

Because even if the 4th and 5th years were actually years that rents decreased, the tenant/pros. buyer doesn't know that in years 1, 2 and 3 of rents increasing. That's what rent-vs.-buy calculations do not and cannot take into consideration, the subjective stabbing in the dark at any given moment of a person who tries to predict his/her future. The other flaw in these rent-vs.-buy arguments is that "but taxes and common charges will go up!" Yes, very, very true, but most people who buy an apartment have lower taxes and cc/maint. bills than their mortgage payments, and there's this thing called the fixed rate mortgage.

I never said "rapid" rise or anything other than they were up YOY. The source of Inonadas data says rents in all categories are up. Thus I have won the argument. The rest is straw men.

"If they are up 0.01% YOY, I am correct."

Let's do the following. Every day stocks are up I pay you $1. Every day they fall more than 1%, you pay me $100. You'll be correct overall, I'll make money, and everyone will be happy.

"I never said "rapid" rise or anything other than they were up YOY. The source of Inonadas data says rents in all categories are up. Thus I have won the argument. The rest is straw men."

If you want to ignore "the rest", you'll note that the numbers that I've always quoted -- avg rental price -- are down significantly YoY. From $3710 to $3465, or -6.6%. Shouldn't I be the one snorting like an idiot about a decisive victory, all the rest is straw men?