The average rental price in Manhattan reached an all-time high last month, as rising mortgage rates and housing prices force prospective homeowners into the rental market.
According to a survey released on Thursday by real estate brokerage company Douglas Elliman, average rents in the nation’s most densely populated county jumped to $5,113 in July, a 28 percent rise from the previous year.
The median rent, which better reflects the pricing that a typical tenant would encounter, reached $4,150, a 2.5 percent rise from June and a 29 percent increase from last year.
High demand for Manhattan apartments is keeping the market tight, with rental listing availability down 44% from last year.
The average flat spends just 26 days on the market before being rented, a 48 percent decrease from June and less than a third of the average turnover recorded a year earlier.
The typical rent for a studio apartment was $3,000, up 23% over last year, while the median rent for a one-bedroom apartment was $4,000.
In July, the median rent for a two-bedroom apartment was $5,000, while the median rent for a three-bedroom apartment was $6,500, representing 22 percent and 18 percent increases over the previous year.
Rising mortgage rates and sky-high property prices have kept many potential buyers out of the market in recent months.
The average 30-year mortgage rate was 4.99 percent last week, down from recent highs but still about double what it was in January, before the Federal Reserve started hiking benchmark rates to combat inflation.
Meanwhile, the national median house price increased 13.4% year on year in June to $416,000, the highest level on record, according to the National Association of Realtors.
According to a late July survey from Realtor.com, renting is now cheaper than purchasing a starting home in three-quarters of the top 50 US cities – a significant shift from a few months ago, when buying was normally less expensive.
The survey revealed that although median rent touched a record high of $1,876 in June, up 14 percent from a year earlier, it still offered a monthly savings of $561 over the monthly cost of purchasing a first home, which soared to $2,437.
Buying a starter home was the cheaper long-term alternative than renting in more than half of US cities as recently as January.
The median rent in New York City – throughout all five boroughs, not just Manhattan – was $2,989, compared to the median monthly mortgage payment of $5,081, implying that the average renter spent $2,092 less per month.
During the COVID-19 outbreak, many New Yorkers evacuated the city, and rental costs plummeted as desperate landlords offered special bargains to get prospective tenants into their flats.
To persuade tenants to sign new leases, several property management companies provided substantial discounts or sweeteners, such as multiple months of free rent.
According to Jonathan Miller, the real estate consultant who prepared the Elliman report, once the vaccine was released and disrupted the narrative that the city was ‘unsafe,’ not only did some residents choose to return, but so did other New Yorkers who had been driven out by previous rent hikes looking to take advantage of the new discounts.
Miller noted that while mortgage financing continues tight, fewer individuals are able to qualify for houses in the city’s outskirts, pushing others to join the city’s congested pool of apartment searchers.
‘As more individuals have been forced into the rental market, competition and rental costs have increased,’ Miller added.
As rental rates surpassed records in May, New Yorkers started posting footage of huge lineups forming on street corners to visit some of the city’s more inexpensive apartments.
The rivalry for apartments is further worsened by a lack of supply, since apartment listings in Manhattan continue to be scarce.
According to the Elliman study, the listing inventory of 6,669 in July was substantially below last year’s high of 11,794.
The vacancy rate of 2.08 percent was also much lower than previous year’s rate of 6.07 percent.
Discounts are essentially non-existent, with the average markdown from listing price at 0.2 percent, down from 1% last year.