Rent growth slowing only in most expensive areas: Zillow

In NYC, prices softened in about 85% of luxury ZIP codes
June 03, 2016 10:12AM

1067 Fifth Avenue, an example of the city's newly more affordable rental stock

1067 Fifth Avenue on Central Park East, an example of the city’s newly (somewhat) more affordable rental stock

All rent growth slowdowns are equal, but some rent growth slowdowns are more equal than others.

In many of the nation’s cities, rent growth in luxury ZIP codes has leveled off while prices continue to rise in less expensive areas, a Zillow study found, according to Bloomberg.

In New York, prices grew more slowly in about 85 percent of “luxury” ZIP codes, on Zillow’s definition, between April of 2015 and April 2016. But, citywide, growth slowed in only about 55 percent of ZIPs.

The reason? Rental development in the city has “skewed to the higher end,” in recent years, Miller Samuel’s Jonathan Miller told Bloomberg. Investors are also buying units at the city’s many new condominium developments and placing them on the rental market.

That extra supply is, finally, cutting into prices. The rest of the market hasn’t seen a similar glut.

Citywide, City Observatory’s Daniel Hertz told Bloomberg, “The number of people willing to pay higher and higher [rents] in more and more neighborhoods is still larger than the amount of housing to absorb that demand.”

Rental inventory spiked in April, climbing 23 percent year over year to 6,718 listings. According to Miller Samuel. Landlords also increased incentives and cut asking prices at a higher rate than in previous years. Overall though, rent grew year over year, after having fallen in March for the first time in two years.

Sam Zell’s Equity Residential dropped its revenue forecast for the second time in 2016 this week, citing weakness in its New York portfolio. [Bloomberg]Ariel Stulberg