Our brownstone one bedroom rental in Boerum Hill was small but nicely renovated. The first open house had 15 reservations. Most of these renters made offers, some exceeding the asking price of $3,500 per month.
An Upper West Side townhouse refurbished for sale received a rental offer for $35,000 before the refurbishment was completed or put up for sale.
A bright and airy two-bedroom, two-bathroom high-rise apartment on Third Avenue was put up for $11,000 and rented immediately. There was no room for price negotiation.
Never before has the New York City rental market moved so much. Prices are higher than they have ever been, if not higher. Optional items are out of stock. The hopeful tenants experience one setback after another. The daring ones offer more than the asking price just to get into the game. Since early last year, the New York-wide rental market has tightened and prices soared, even as many of the city’s sales submarkets have lost value. what’s going on?
Historically, the sales and rental markets have operated in a relatively clear relationship to each other. More and more buyers started bidding as the sales market broke previous price records. They then turned to the rental market and let it sit for several years until prices normalized again. Add in those renters, and the new graduates who flock to New York every summer with their first jobs after college, and the ebb and flow between selling and renting has been pretty predictable.
Then the pandemic changed everything. So many people left town that rentals all over town were either destroyed or never renewed. Throughout the second half of 2020, landlords looking to fill vacancies signed cheap two-year contracts as workers returned. Inventory was absorbed, and two years later, when rental properties were scarce again, landlords hiked rents and most tenants screamed, weighed their (minimal) options, and stayed put. As a result, inventories remained tight and prices rose. and up.
Meanwhile, the one-bedroom and two-bedroom sales market also began to tighten, and many of those units began to receive multiple bids. A price that indicates a stable market, not necessarily a historically high price. As such, competition for purchases has also increased, further reinforcing continued interest in the rental market as an alternative. In addition, a new element of skepticism has entered the market. The value of his property holdings has risen since 1975, when the city nearly defaulted on its bonds. Sure, there have been some ups and downs, but the apartment you bought for $50,000 in 1975 is worth millions today. But the apartments he bought in 2006 and he bought in 2007 aren’t worth much more today. Young buyers, like their parents, don’t think real estate is necessarily a great investment. If the property they bought 15 years ago may actually be worth less today, they wonder why not rent it out, especially now that interest rates are so high. They would rather spend their money on adventure travel.
In summary, while the luxury market remains stagnant, the rental market is at a historic high across all categories, the sales market is stable, and there is even a turnaround towards cheaper properties. So many factors contribute to today’s market reality, including high interest rates, political uncertainty, declining inventories, price pressures (whether rising or falling), and mismatched expectations between sellers and buyers. increase. In this environment, rental transactions move at the speed of light, but each sale transaction is unique.