NYC’s housing market slowdown turns sellers to renters

When Devin Someck, a principal at Living New York, started receiving unsolicited offers to rent unit 4B at 204 Montrose in Williamsburg, he and the seller decided to test the market.

They listed it for rent at a number higher than it had previously achieved: $3,500 per month. The unit drew multiple offers within the first day of showings and ended up signing a lease at $4,050 per month, making the owner’s cash-on-cash return almost 9 percent.

As New York City’s housing market cools, brokers say pivots are common among hopeful sellers who opt to hold off on selling their units and instead rent them out to take advantage of the stronger market.

“You’re putting your money to work in a really good way,” Someck said.

Sellers and their brokers have had to get more creative as rising interest rates, high inflation and a lack of inventory caused buyers to flee and the market to deflate.

Contract signings were down 30 percent year over year last month for Manhattan co-ops and 29 percent for Manhattan condos last month, according to data reported by appraisal firm Miller Samuel for Douglas Elliman. In Brooklyn, contract signings for condos, co-ops and single-family homes were all down.

“The whole market has been so spoiled for so many years,” said BOND New York’s David Kazemi, who recently signed a $15,000 rental — rather than selling the unit — in Brooklyn. “It’s just a tough pill to swallow.”

Meanwhile, renters have been rushing to the city looking for anything and everything. Those with expiring Covid discounts are looking for something cheaper, joining the wave of graduating students and those returning to the city after fleeing in the wake of the pandemic.

“It’s a pressure cooker, basically,” Someck said.

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Corcoran’s Ashton Palmer had three units — at 104 East 37th Street, 737 Park Avenue and 40 West 77th Street — all originally for sale, go for rent.

“Instead of really letting their listing sit on the market, it’s been an easier conversation with having them try to list for rent because they understand what they can get out of it,” Palmer said.

Still, not all sellers are keen to become landlords.

“The day that you decide to rent it out, this is now an investment for you, and it’s part of your overall financial portfolio,” said William Krooss-Tadas of Keller Williams New York City. “That decision comes with consequences, with risk and reward.”

Krooss-Tadas has apartment 1I at 187 Pinehurst Ave, which is listed for rent for $4,000 — an unprecedented amount for the building — and listed for sale at $810,000. He’s seen sellers do the same in other parts of the city.

Janna Raskopf of Douglas Elliman noted understanding sublet policies for co-ops, maintenance and legal obligations are all things sellers may not be prepared for if they choose to rent rather than sell.

“It’s tempting, of course, when the rental market is so hot to think that it’s just quick money, but there’s things that go behind being a landlord besides just signing a lease and giving away the keys for 12 months,” Raskopf said.