Manahattan Rental prices will coninue to increase--Lift off

does anyone has an opnion about this article: http://www.businessweek.com/ap/financialnews/D90NCOQ80.htm

houser, you're 100% correct. It doesn't matter that market rental buildings are offering free rent now, or that nobody's seeing an increase. It doesn't matter that I pay $4500 for a 2-bedroom & my building can't offload 2 2-bedrooms on higher floors WITH balconies for $5300.

None of that matters. Wall Street doesn't matter. Rents aren't going up 10% - they're going up 40%, even though incomes are falling! We're charging the rent on our credit cards BECAUSE WE LUV IT HERE! Because Manhattan is the only place on the Face of the Earth to live. That's why.

LMAO.

steve rents are indeed going up unless there are morons like you who like moving every year in December. Buckle up boys and girls and get ready to read and experience rents hikes in Manhattan in the coming weeks.

BTW rents will increase 5 to 10 % this year compared to last. It sucks but I'd rather live in Manhattan than Dumbo.

houser, every year rents are 5-10% more expensive in the summer months compared to Nov-Feb prices, if that's true this year it will simply be the rental market as usual in Manhattan.

As soon as incomes rise 5% to 10% per year, then I'll believe that rents can rise 5% to 10% per year. Otherwise, there'll have to be 30-40 people in every studio to be able to pay for it.

I'm not sure how that 5-10% holds steve. With 59% of Manhattan's inventory rent subsidized, you cannot make a correlation of incomes to rents as you would in other areas. Tell us how that correlation works here steve, you have not been able to convince us.

steve unfortunately I wish you were right. You see steve rents have historically gone up in Manhattan as mrsbuffet states and will continue to rise. Maintenance costs are increasing and being passed on to the renters. There are fewer buyers out there and they are renewing their leases instead of buying (which is good for your company nybits) thus inventory will drop and this year there will probably be an increase of guarantors.
steve with money your making off of nybits you should well afford to rent a amore luxurious apt.

JuiceMan, I can't convince people of anything if they don't believe that market forces do work in Manhattan.

Your "correlation" of income and rents is partially true, but let's say that stabilized prices increase 3% next year. That's 60% of the market. So to reach houser's 10%, if you're talking about ALL rents (stabilized and non-stabilized), market rents would have to rise 20.5%.

Not happening.

Stabilized apartments, however, do NOT compete directly with non-stabilized apartments (though they do drive up the cost by limiting supply) because the turnover is very, very low. Rents are calculated differently for stabilized apartments (as a function of input costs) and market-rate apartments (as a function of demand). The rents I'm discussing are market rents, not stabilized rents. Market rents are what directly compete with market-rate property to buy. Not subsidized housing, or the projects.

I am only discussing market-rate rentals.

steve, I believe in market forces. What I don't believe are claims about correlation when there are constraints on a significant portion of the market. Incomes cannot be correlated to rents if 60% of the rental market ignores those very market forces.

I find this topic quite interesting and at the very core of the rent vs. buy debate. houser had some interesting perspectives regarding this topic on another thread, lets bat this one around a bit and see what we can learn from it.

JuiceMan, I only look at market rents and market purchasing prices. If you're looking at overall Manhattan figures, you are correct, the correlation is skewed. But you're looking at two different markets - one regulated, the other not.

Incomes ARE correlated to rents for market-rental buildings. That's the only thing I can discuss. They are not as correlated for rent-stabilized apartments. But there is very little turnover of stabilized units.

You're talking about two different markets. The occupancy rate for stabilized apartments is very high, not only because of the benefits of living in one, but because it's illegal not to rent out a vacant stabilized apartment. The occupancy rate for market-rate rentals is much lower, but I don't know what it is or how to find it out. The prices of the two types of housing is obtained using very different approaches. There are times when stabilized apartments increase in price when market-rent apartments fall.

If you deny that market rate rentals are correlated to incomes, then it must be because you've never filled out an application that says you need at least 40x the monthly rent in income for them to rent to you. The income correlation for stabilized units is two years in a row making over $175,000, and monthly rent in excess of $2,000.

I don't think that rentals are 100% correlated with incomes b/c there is a subset of people willing to take on roommates and live in a smaller area. e.g. parting out a 1 bdrm for 2 people. So while there is a correlation, it is prob nonlinear. I do suspect that rents will either stay the same or drop (corrected to inflation) b/c there seems to be a bloodbath on wallstreet. The question is whether those "extra" people on wallstreet are going to stay in NYC or leave.

This discussion suffers from a lack of any meaningful data. Houser's initial claim that rents are going to go up are as well substantiated as a claim that prices are going to go down to $0 because a giant asteroid will hit the Earth later in the year. Similarly, as hsw9001 points out there are certainly factors that make the income : rent ratio nonlinear (and, for that matter--what incomes do we care about? are the people getting laid off now part of the demographic that traditionally rents?), but since no one has shown any data about rent : income trends over time in Manhattan, this whole discussion is basically people just making stuff up.

http://www.nypost.com/seven/05192008/news/regionalnews/landlords_slashing_city_rents_111496.htm

I understand what you are saying steve but if 60% of those renters are in some sort of stabilized situation, rents would crash as you predict only if following are true:

1) The majority of Wall Street folks that experience a downward trend in incomes rent in Manhattan
2) The portion of Wall Street market rate renters would have to be greater than stabilized renters (there has already been an exhaustive dialog about people gaming the stabilization system)
3) Incomes for other market rate renters without Wall Street jobs would need to rise less than Wall Street incomes fall
4) If people are truly going to wait to buy, market rents will have little correlation to the increase in demand

"b/c there seems to be a bloodbath on wall street"

I understand people are losing their jobs, but I have yet to talk with anyone that actually works at an IB claim that there is a bloodbath on Wall Street.

hsw9001, rents are still correlated with income, albeit with the income of many people. There is a legal limit, however, on the number of people who can occupy a dwelling by the size of the dwelling.

jordyn, I wouldn't go as to say that the data are as obscure as data on asteroids.

KISS's post is what I have seen as I monitor things on nybits (no, I don't have an interest in it).

JM, I don't understand your logic. I'm not talking about stabilized apartments at all. I consider that a closed market relevant only insofar as it reduces (considerably) the supply of market rate rentals, but that's another discussion: what would happen if they eliminated rent regulation altogether? Besides the political uproar of people who think they have a God-given right to have all their needs met for free, rents would fall across the board in the medium- to long-term given the excess supply.

Nonetheless:

1) Why would that have to be true if, in fact, demand as a whole falls in part because market rents are higher than people can pay? The people I know in my building aren't, in fact, Wall Streeters: one works for KPMG, another as a buyer for Macy*s, lots are in fashion.

2) That doesn't make any sense at all that I can figure out.

3) That doesn't make any sense either.

4) People can wait all they want - seems to me to be a smart thing to do. They just can't pay more than they can afford to get a place to live.

steve, I'm talking about market rents. If you are saying rents will crash because of a wall street implosion (and therefore a dip in incomes) than the four points above would have to be true.

First I didn't say rents would fall only because of Wall Street, but that's neither here nor there.

"1) The majority of Wall Street folks that experience a downward trend in incomes rent in Manhattan."

Not even remotely true. Only enough to affect demand materially would have to rent, and they wouldn't even need to be directly related to Wall Street, but could be in ancillary fields, or in any field experiencing a downturn.

"2) The portion of Wall Street market rate renters would have to be greater than stabilized renters."

Again, not even remotely true. Only enough to affect demand for market-rate rental prices. It has nothing to do with stabilized renters.

"3) Incomes for other market rate renters without Wall Street jobs would need to rise less than Wall Street incomes fall."

Not if they're affected by a general downturn, or a downturn in an ancillary field. Every 1 Wall Street job in NYC generates 3 other jobs: there's a multiplier effect.

"4) If people are truly going to wait to buy, market rents will have little correlation to the increase in demand."

You are assuming that people who "are truly going to wait to buy" don't already have a place to live and therefore must find someplace and that someplace will be Manhattan market rentals. You will need to provide evidence of that.

Just FYI, this from MarketWatch:

"Even before Bear's fall, compensation consultants predicted a 30% decline in incentives 2007 bonuses and a 15% reduction in [finance] jobs from the 849,600 employed at its height last year, according to Johnson Associates Inc. and data from the U.S. Bureau of Labor Statistics. That means in 2008 alone, more people will lose their jobs than in the industry's steepest decline between 2001 and 2003 when 89,000 lost their jobs."

According to CNN and the Comptroller General's office, there were about 180,000 Wall Street employees in all of NYC last year. A 15% drop in numbers would mean 27,000 jobs lost. A 30% drop in incentives (bonuses) - $33.2 billion last year - amounts to a decrease of $9.96 billion, or $54,000 per employee.

Them there's a lotta bucks.

http://www.osc.state.ny.us/press/releases/jan08/011708b.htm
http://www.marketwatch.com/news/story/dimons-personnel-appeal/story.aspx?guid=%7BE999AB65%2D70A6%2D4038%2DB61A%2D40CAF141A95E%7D