So much for that slowdown: February rents smash records

Higher mortgage rates stoked demand for rentals in NYC

February Rents Buck Slowdown Story, Smash Records For Month

In the latter half of last year, it looked like New York City rent growth had finally returned to earth. Prices had settled from July highs, and it looked like the run of record-setting rents had ended.

Not so fast. 

Last month, rents in Manhattan, Brooklyn and Northwest Queens unexpectedly increased to all-time highs for February, according to a report by appraisal firm Miller Samuel for Douglas Elliman.

In Manhattan, the median rent hit $4,230, up 3.3 percent from a year ago and 2 percent from January. The last time borough prices notched an annual increase was October.

Brooklyn’s median rent clocked in at $3,499, 2.9 percent higher than a year ago. In Queens, prices rose month-over-month to $3,239.

Miller tied the growth to the mortgage market, noting rates trended higher in three of the past four weeks. That deterred would-be homeowners from entering the sales market, stoking demand for rentals.

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“The rental market seems consistent with that narrative,” Miller said.

Expectations that the Federal Reserve won’t cut rates until the second half of 2024 have also driven more prospective buyers to remain renters. If potential homebuyers believe mortgage rates may drop in a few months, they are more likely to press pause on their search. 

Some brokers are forecasting mortgage rates will drop in the third or fourth quarter, CBS reported. If those predictions pan out, “rents will probably soften again,” Miller said.

Demand this early in the year could spell another hot summer for prices.

The rental market typically cools in the winter. In Manhattan, the number of new leases signed in February surged by 11 percent from January and nearly 8 percent annually, making last month the third-highest February on record for new agreements.

Demand in Brooklyn was even more robust. New lease signings jumped by about 17 percent month-over-month and a startling 62 percent year-over-year — the second-highest on record. In Queens, the number of new signings broke a record.

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