The Rents, They Are A-Droppin'

Yep see how much they are a dropping when your lease expires and you want to renew. And let's see how they are a dropping come Spring and summer time.

spunky, give it a rest man. I think everyone knows how you feel about this by now.

Can you please give the link to this report?

Hearing that "...Average rents fell this month for Manhattan apartments..." doesn't really help fill in the picture - I'd think an area-by-area breakdown would be much more useful, particularly when desirable areas like SoHo or TriBeCa are up between 7%-10% in one year (which is pretty massive) despite the gloomy economic forecasting. If the brekdown is more like 'everything in desirable areas south of 79th Street is up, but everything above 86th is way down,' then it doesn't mean very much in my opinion. If the drops are spottier and scattered, then I'd like to see which areas are up, which are down, and by how much to get a more complete picture.

malraux here you go

http://www.tregny.com/manhattan-apt-rental-report.jsp

spring and summer won't raise rents because there won't be jobs for people to move to New York for.

I think that's a bit oversimplified, Julia... You could argue that rental demand may actually increase if potential buyers decide to hold off on purchasing due to job fears. There's a lot of factors that may affect both supply and demand of rental units, and only time will tell.

We're all looking in crystal balls..bottom line..we just don't know..

One economist gave an interview to therealdeal.net suggesting that rents would begin to rise because some people might hold off buying.

If today's stock market and so many recent corporate earnings reports are to be believed, the national economy is not in such horrid shape. More likely than not, the national economy will weather a brief downturn and emerge in the next half year in good shape, and the Manhattan RE market will stay strong, both in terms of sales and rentals.

That's what my crystal ball says!!

Hey everyone, I am the author of the report and thought I'd jump in to answer some of the questions being asked.

malraux - It appears rents are down in almost all neighborhoods, but not necessarily for all apartment types. If you check out the report you'll see that we try to generalize our findings early on, and then elaborate about each individual neighborhood with detailed charts later.

julia, buster2056, & will - Good question. I was just discussing that with a reporter today and was asked the same thing. My answer was that we are all looking for indicators as to where there market might be heading; since January seems to be slumping when, seasonally, it usually rebounds from December's lows, it appears to be indicative that we have too much supply on the market. Even if demand does increase for all the reasons it could as we head into spring, it's unlikely that it will be strong enough to allow landlords to increase their rents. (e.g., I think we are in for a slow rental market that favors the tenant at least through the second quarter.)

--Daniel Baum
http://www.tregny.com

Finally, something positive for the tenants...

Pls fwd report to all of spunky's tenants! all 3 of them...

Economics 101 tells me that unless the demand for housing in general (rentals plus coops/condos) in Manhattan goes down or the supply of housing in general (rentals plus coops/condos) goes up, a decline in coop/condo prices would mean an increase in rents. If you're livin' in Manhattan and you ain't ownin', you're rentin'; assuming constant supply and demand of Manhattan housing in general, if fewer people are lookin' to own, more people are lookin' to rent. That makes the landlords happy.

Anonymous2: Did you fail econ 101? If apartment prices decline, owners will look to "substitute" renting for selling. That means an increase in supply of rental apartments and a decrease in rental prices.

you must learn. Any speak of a slowdown, rents falling, inventory rising, doesn't fly on this board! Its up up and away, or shut your mouth and bullshit people into bidding ask before its too late. Offering an opinion based on data doesn't work here.

eastsider,

You apparently failed Common Sense 101. Where are all those owners you think will be renting out their apartments going to live? Let me guess: you think they'll all be moving to Hoboken.

For one data point, I just received my renewal notice for a lease ending in March. Metroloft management clearly isnt expecting rents to go up in the Financial District. They offered to renew my lease for 2 years, just $20 above where it is now (signed in March 07). That is a decline in real, inflation adjusted terms.

anonymous2 - if supply and demand were constant, you would be correct. But that's not the case.

If you read DanielBaum's post as well as his report, supply is increasing to the point at which we actually have oversupply. Chalk that up to new condos. Also, bear in mind that many of the foreign buyers are not occupying their apartments, so, of course, many of them are looking to rent them out.

Then look at demand. The financial services sector is getting killed, but this loss of demand hasn't even begun to hit Manhattan since the folks who got laid off don't leave their apartments right away. They look for other jobs, and when they don't find them, they leave or look for cheaper rents.

So, what you'll probably see is a slow weakening in demand as leases aren't renewed or folks need to find cheaper rents. You can also bet that recruiting levels on Wall Street and law firms will be well below recent years.

right urbandigs, most data presented on this board is a biased attempt to convince everyone that the sky is falling. Any speak of increase in OH activity, rising prices, or positive aspects of the economy doesn't fly with the folks hoping to talk the market down. Offering a balanced opinion doesn't work here

Hey, Ill respect if you truly believe that the economy is in great shape, I just dont agree. Seriously though, look at the jobs report and past revisions for 2007. AWFUL! That pretty much solidifes a weak GDP on the next report and clearly shows a softening in the labor market. Real stats. I guess thank god for:

1) MSFT buying YHOO - that added a good 8-10 pts to S & P futures
2) bond insurer bailout talks - yea right. So, Im supposed to be believe that the banks who are looking to soverign wealth funds for cash injections to handle their own crisis are now going to bail out the insurers who guaranteed some 2-3 TRILLION in mortgage backed securities? Think the Super SIV fund 4-5 months ago. When that rumor came out, banks rallied, even though everyone knew it was a failure waiting to happen.

Reality is, lots of smoke signals clouding the fact that the economy is slowing. Recession is almost inevitable at this point. Take away YHOO news and realize that bond insurer bailout is likely not to solve the total problem, and you can see this. Nothing wrong with it. Slowdowns are healthy and they happen. But openly discuss this and you get pinned as a doom & gloomer.

BTW - Manhattan re is very active RIGHT NOW as there are plenty of buyers out there during what is normally a very active season. There see, I said something positive. Question is, are they buying and are they paying higher prices now than this time last year?

Ugh, Urbandigs, you provide some good analysis, but you certainly hear only what you want to hear. Where did I say that I think the economy is in great shape? How do you take that from my post? Of course the economy is slowing! Every day brings economic negatives and positives, lets be realistic on what it all means and leave the drama for our friends at NYU.

Also, NONE of this has substantially impacted Manhattan real estate. If we have a really strong real estate market in Q1, Q2, wouldn’t that suggest a market collapse would need to occur in Q3, Q4 for the market to show a decline for the year? Is that what you are suggesting?

sorry Juice, was responding to "or positive aspects of the economy" line...I would disagree that NONE has impacted our re, I think there was some effect. Here is some real evidence as I just got off phone w/ lawyer whose buy side deal I did, but who didnt take an offer I got them in FEB of 2007.

Offer was for 2.3M, they rejected thinking they can get more. The bought a place through me 5 months later and put their place on market the following month with corcoran. They have offer accepted some 300K lower after 4 1/2 months of hard marketing. Thats the difference. You just wont see this in any dataset until mid/fall 2008 or even later. Prices have not crashed by any means, but 1-3% lower price from this time last year is not so unbelievable. The difference I SEE in todays market as opposed to this time last year, to keep the seasonal component consistent is:

1) dip in confidence, rise in cautiousness - purely psychological
2) desire to negoatiate, lack of desire to bid aggressively unless property is priced below market (like D Heddings unit at 20 W 72nd that was priced 50K below a similar unit that sold 5 months ago.)

Thats it. Both, psychological components. Very hard to gauge so Im left to purely speculate on how this mental change will ultimately affect prices/sales volume/inventory. That is why I worked with streeteasy to get data so we can monitor these things more real time.

If we have a really strong re market in Q1 + Q2, I would want to see how the credit/macro environment has changed by that time! If economy is unquestionably in recession, I would still be cautius for 2008 and expect sales vol to slow and inventory to rise. If credit/macro and economy rebounds and shows strength, I would start to assume that any correction here will be very light, maybe 3-5% in pockets of products only, not generalized. And that is from those who negotiated a deal from a seller that just needed to take the bid and run.

Slowdowns in Manhattan take time to realize and we likely wont know until after it started; like a recession (as we may be in one right now and not know it). Personally, Im putting price declines on back burner for now and instead I think 2008 will be the year that inventory reverses course and grows, instead of declines like the past 3 years or so. What happens in 2009-2010 then becomes the story as we will not have any sig price declines until we see higher inventory levels, say at least 7,000-8,000 listings (we are now in low 5,000's), and sellers compete with each other to move product. This is just a potential outcome in my mind, and may change as environment/credit markets/stock markets change too.

Yes. I agree and think buyers and sellers would both benefit from reading the post above. Nicely stated.

I am looking to buy and noticed that either good stuff goes really fast (anything under $900 / sf or amazing location) OR people are taking their places off the market. One realtor told, people are waiting to see how much supply is going to be in the spring.

But.. I am a first time buyer with zero experience... help?

If your a first time buyer looking for a good broker give urbandigs a call. Juicman, thestreets and I highly recommend him.

Just don't ask him anything about a SIV, the bond market, or Helicopter Ben. He'll spit the dummy on you.

I'm in Peter Cooper and as of August I'd heard that units comparable to mine were being sent rent renewal leases for about $6,000 per month. My lease renews April 1, obviously lower than summer rates, my offer was about $4200. not great, but not bad.

We also have a number of friends who are looking to move to Westchester, because they can't afford two kids in the city (two relatively high incomes, by the way, with infant to preschool children).

The Manhattan market will be the very LAST to see the effects of this problem because our building was so much later than most markets. It's VERY hard to build in NYC, particularly the larger developments, and all of our sales figures are based on contracts that in some cases occurred over a year ago. But, just like some other markets, construction is still booming.

Some interesting banter here. Manhattan will be last on the list of declines nationwide and likely some of the smallest. Though smallest could still mean 10%. Island, Wall Street, International $$ - you can paint a pretty picture but take heed. Funny how all the economists above do not speculate on international markets...a huge indicator of the U.S. economy considering we're worth less than ever. It's global and it's coming. NY is not immune.

it's coming please please get out while you can head for the hills!

Where's Spunky 19 months later?

lol

It might be better just to let the spam-y bump of this thread (and a bunch of others) lie, but I just couldn't leave this post alone:

"Economics 101 tells me that unless the demand for housing in general (rentals plus coops/condos) in Manhattan goes down or the supply of housing in general (rentals plus coops/condos) goes up, a decline in coop/condo prices would mean an increase in rents. If you're livin' in Manhattan and you ain't ownin', you're rentin'; assuming constant supply and demand of Manhattan housing in general, if fewer people are lookin' to own, more people are lookin' to rent."

It's pretty funny to see someone invoke Economics 101 and then demonstrate within the next couple of sentences that they in fact failed the course. The suggestion is that a decline in coop/condo prices means an increase in rents because it indicates that people don't want to own. Actually, the decline is the market's way of keeping the coops and condos occupied - prices fall until they reach a level where someone wants to own and live there at that price - so that coop/condos house the same percentage of total residents as they always did. That leaves the rest of the population to be housed in a rental stock that is also basically static over short time periods (obviously more elastic over longer periods given new construction). However, in this scenario the cost of owning has gone down, so on the margin the rent vs buy analysis has shifted more toward buying relative to wherever it started, which puts DOWNward pressure on rents in order to compete. anonymous2's theory is that a decline in the price of a substitute, in this case owner-occupied housing, puts UPward pressure on the price of a good, in this case rental housing. I don't think they teach that in Economics 101.

I think right now though , you have a decline in both sales and renatl because theres simply more supply of both items and reduced demand period. theres simply less people with money to spend, therefore both go down. the commercial real estate market shows how employmnet is no where near a turn around point. with evry passing day the RE market weakens.

generally agree. more supply with new condo/rental building backlog coming into the market. however, "reduced demand period" has to be qualified with "at any given price." there is lots of demand to live in manhattan generally, just not at historical Manhattan prices, so prices adjust and eventually the units fill up. at a price, manhattan steals residents from surrounding areas.

note that in anonymous2's world, rents would be going through the roof right now because demand to own is so low!

Ive been looking for a rental for the last few weeks and i still see a lot of disconnect; just like everywhere else in this market. Purchasers in new developments are trying to rent out their 1 bedrooms for 4k+ because they want to cover their carrying costs. The large rental buildings are trying to hold up prices so they dont have a rush of renegotiations. Ive yet to see a decent 2 bedroom (under 4500) in a nice building in either Tribeca, W. Village, UWS or Greenwich village.

Even in W'burg, which can be is a smaller Miami situation, still had not seen rents soften much.

"Manhattan Rents Decline for the First Time in Two Years...

...Manhattan units available for rent took an average of 45 days, or 16 percent longer, to find tenants than they did a year earlier, while landlords agreed to discounts of 3.9 percent, compared with 2.3 percent a year ago, Miller Samuel and Douglas Elliman said.

“Rental-market prices are very high and they can’t really go much higher for the most part because a lot of the economic factors that would allow them to go higher, such as good hiring, don’t exist,” said Gary Malin, president of brokerage Citi Habitats..."

http://www.bloomberg.com/news/2013-10-10/manhattan-rents-decline-for-the-first-time-in-two-years.html