Through much of 2022, spiking rents broke records in New York and helped push inflation to a 40-year high this summer.
But tenants, overall, were able to keep up. Many still had pandemic savings and their wages had risen in tandem with rents, according to Real Page data from July.
Two months later, that tide may have turned.
In September, Manhattan rents slipped for the second straight month, according to a report by appraisal firm Miller Samuel for Douglas Elliman. The median rent and rent with concessions fell to $4,022 and $3,982, respectively. Since July, both metrics have dropped about 4 percentage points, an indication that landlords are lowering prices to meet the market.
Not all landlords, though: The luxury market hit a new high in September, its third in four months.
The split performance signals that rents may have risen as high as inflation-ravaged middle- and lower-income tenants can bear, while the wealthy are able to shoulder the premium, said report author Jonathan Miller.
“It’s a very plausible reason,” the Miller Samuel CEO said.
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Miller reads the minimal price declines over the past two months as a sign of a cresting trend.
“The market has reached some sort of affordability threshold,” he added. “There’s only so high it can go before payroll doesn’t cooperate.”
Last week, Forbes reported that wages had failed to keep pace with inflation for 17 straight months.
And Realtor.com shared Wednesday that 60 percent of surveyed renters reported feeling burdened by the cost of living.
“The big thing that we’re seeing is the stress that these high rent prices are causing,” Ryan Coon, a Realtor.com manager said at a National Association of Real Estate Editors conference.
But if inflationary pain is curbing demand, it’s only the early innings.
“The market remains relatively tight even though prices aren’t at all-time records,” Miller said.
Manhattan in September saw the smallest percentage of rental concessions in six years. Bidding wars still affected 1 in 6 lease signings.
Brooklyn rents are still relatively strong, too. The median rent with concessions fell month-over-month for the first time in nearly a year, a sign that the market is moving sideways, Miller said.
It’s possible Manhattan’s dipping prices could be the canary in the coal mine for a Brooklyn slide.
City rents first spiked in April, Miller said, and Brooklyn prices saw a similar jump in May. Similarly, Manhattan rents began to plateau in August, and Brooklyn’s in September.
“Plus or minus a month, they’re in sync,” the appraiser said.
The median rent fell 1.2 percent month-over-month in August, then 1.9 percent in September.
October could serve as a litmus test for whether recent price declines signal a greater downturn in the market. Despite all the rate hikes, stock market tumbles and recession fears, the economy and job markets remain robust.
“So you could argue if October sees a higher month-over-month decline than September did, perhaps we’ve got a trend of accelerating declines,” Miller said. “But until we see that, we just know that rents aren’t rising.”