New Yorkers hit a wall last fall. Rents had climbed relentlessly while salaries had not, and tenants on the median could no longer afford — or consent to — higher housing costs. The era of rapid growth came to a close.
Landlords, though, couldn’t complain. Affordability may have capped gains but prices had stuck near all-time highs.
That tide may finally be turning, catching owners in the undertow.
Manhattan’s median rent in August slipped annually for the third time in four months, settling at $4,245. That’s a 3.5 percent decline from the same time last year when prices peaked at $4,400, according to a Douglas Elliman report by appraiser Jonathan Miller.
Tenants’ refusal to pay more for new digs drove the decline, which played out in Brooklyn and Queens, too. The median rent in the respective boroughs fell 5 percent and 9 percent year over year.
The Federal Reserve’s moves over the next several months could turn the downslide into a trend.
Fed Chair Jay Powell has all-but promised to cut rates next week and markets are expecting two more cuts before years’ end. A lower federal funds rate typically translates to lower mortgage rates, which invite would-be homebuyers to pull the trigger and wave goodbye to their rentals.
More supply should shake out to lower rents, and for landlords — less revenue.
“Rental landlords will likely feel more pain,” Miller said.
Already, the rate for a 30-year fixed mortgage has slipped to a 19-month low — an average of about 6.1 percent as of Sept. 11 — in anticipation of the Fed’s rate cut, according to Zillow.
Househunters nationally have jumped on the dip. At the end of last week, applications for home purchase reached a two-month high, according to a Mortgage Bankers Association index.
Tenants shouldn’t hold their breath for any real relief, though. Barring a recession — a fringe fear based on the recent rise in unemployment — the city’s tight supply means prices will remain historically high, even if they decline. Manhattan rents as of August were still 21 percent above levels in 2019, Miller noted.
“It’s not that rents will fall sharply, but the outlook for the rest of the year is softer price trends,” Miller said.
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