Photo: Robert Clark
Some would-be New York City homebuyers are starting to “camp out” in the rental market until some of the uncertainty facing the sales market eases, according to a new report by New York brokerage Douglas Elliman.
“Although mortgage rates seem to have stopped rising, they are higher than last year and the new tax law adds to homeownership costs. Plus the apparent disconnect between the housing market and the economy itself,” Jonathan Miller, CEO of the appraisal firm Miller Samuel and author of the report, tells Livabl.
In other words, Miller says the economy is projecting strength but the housing market is not.
The Manhattan rental market was characterized by rising concessions, falling vacancy rates and price trends skewed higher by the influx of new development rentals in November.
Average rents in Manhattan rose 1.5 percent year-over-year to $4,151 in November. Compared to last year, there were 27.6 percent fewer Manhattan rental apartments on the market in November. Listings spent an average of just 29 days on the market, 20 days less than last year at the same time.
Landlord incentives rose year-over-year for the 42nd consecutive month in November. Some 42 percent of leases contained incentives, up from 29.6 percent last year. The average size of the incentive was 1.2 months of free rent or equivalent in November, down from 1.3 months last year.
Landlords typically provide incentives in the form of a period of free rent, in order to keep units occupied and vacancy rates down.
Manhattan’s vacancy rate was 1.65 percent in November, down from 2.35 percent last year. The vacancy rate has fallen on an annual basis for the last sixth consecutive months as incentives have kept buildings full.
Meanwhile, landlord incentives dominated the Brooklyn rental market in November, as incoming new development units skewed overall rents higher despite weakening market conditions.
“I don’t think it’s as much about next year’s L-train shutdown as an ‘affordability threshold’ that has been reached,” says Miller.
Some 8 out of 10 new construction rentals had incentives in November, while the market share of leases that contained incentives has increased on an annual basis for the last 34 consecutive months. Nearly 47 percent of new leases contained incentives in November, up from 18.6 percent last year.
Average Brooklyn rents jumped 2.2 percent year-over-year to $3,149 in November. Listing inventory fell by 20 percent from last year. Units were on the market an average of 27 days in November, down from 43 days last year at the same time.
In Queens, the recent decision by Amazon to locate their HQ2 in Long Island City (LIC) hasn’t had any apparent impact on the local rental market — yet.
“For now there won’t much of an impact but the sentiment about the market has improved significantly. Since the complex has to be approved and built and the market already contains a significant oversupply of rentals, it may actually be a few years before there is a meaningful tightening of the market,” says Miller.
Average rents in the northwestern section of the borough (which includes LIC) rose 6.6 percent year-over-year to $2,985 in November, with high levels of new construction rentals skewing overall rents higher.
November marked the fifth consecutive month of large annual gains in the number of new leases, prodded by rising incentive market share. Almost 60 percent of new leases across all unit types contained incentives in November, up from 44.5 percent last year at this time.
Miller says that the first sign of Amazon’s impact on the Queens housing market will be the “melting” of concessions. In November, more than 80 percent of all new constructions rentals had a landlord incentive.