New York City landlords suffered a blow and renters caught a break last month — or so it seemed.
In Manhattan, Brooklyn and Northwest Queens, the median rent slipped from a year ago, seemingly bucking expectations that it would top the record highs of last summer.
A closer look at the numbers shows why: The average size of newly rented apartments got smaller.
The bottom line is that tenants’ dollars aren’t stretching as far, and landlords are getting more per square foot.
The median rent in Manhattan was $4,300 in July, down 2.3 percent from the same time a year ago, according to a Douglas Elliman report by appraiser Jonathan Miller.
Meanwhile, the average size of a rental fell for the 11th straight month. In new development, tenants leased even smaller apartments than last year, signaling tenants had more trouble affording higher-priced units.
“Tenants are leasing smaller apartments on average to try to squeeze out more affordability,” Miller concluded.
Across the East River, the median rent in Brooklyn dipped by 8.9 percent year-over-year to $3,600 as the average size of a newly leased apartment shrunk for the 10th straight month. Queens posted a 5.2 percent decline to $3,450 and renters leased tinier apartments for the first time in four months.
Other metrics show the city’s rental market is still very much on fire.
In Manhattan, new lease signings topped a July record. In Brooklyn and Queens, they hit an all-time high. Listing discounts in the outer boroughs that the report tracks sank to record lows for the month.
“Demand is still strong,” said Hal Gavzie, executive vice president of residential leasing at Douglas Elliman.
The Federal Reserve is partially to blame for a rental market that will not cool down. A year of rapid rate hikes jacked up mortgage rates and drove more prospective homebuyers to sit tight in their rentals and hope rates settle down to earth.
Gavzie noted a “slightly lower” number of leases signed this July compared to last year ”due to current tenants staying in place.”
There could be hope on the horizon for those homesearchers.
Mortgage rates as of Aug. 1 dropped to their lowest level since February as the market baked in an expected September rate cut by the Fed. The standard 30-year, fixed-rate mortgage slipped to 6.73 percent, a far cry from the cheap financing home buyers could lock in a few years back, but an improvement nonetheless. A year ago, it was 6.9 percent.
If more would-be buyers take the plunge into homeownership, it would take some pressure off the rental market.
Miller emphasized that the degree of relief depends on the size of the Fed’s cut expected on Sept. 18. It could be 25 or 50 basis points.
After a jobs report triggered a dismal Monday for stocks, economists overwhelmingly predicted the larger cut, CBS reported.
Meanwhile, recession fears are back after stock investors reacted to the slowdown in hiring and spike in unemployment to 4.3 percent — near a three-year high, although still historically low.
Recessions are bad for workers but can be good for tenants. When people have less money to spend on rent, they may find roommates or leave the city completely, resulting in lower demand and cheaper rents.
Miller said recession predictions should be taken with a grain of salt. On the heels of the market’s bad day, Goldman Sachs analysts hiked their odds of a recession to 25 percent from 15 percent.
That’s still low. Goldman Sachs characterized the risk as “limited.”
“It sure sounds like the markets are overreacting,” Miller said. “Unemployment is still at 4.3 percent.”
Read more
Residential
New York
NYC rents stay high as tenants lease smaller units
Commercial
New York
Hey NYC: Get ready for another summer of record rents
Residential
National
Mortgage interest rates drop to lowest level since February