Manhattan Rents Reach Record Highs Despite Cooling Economy
By The Manhattan median asking rent climbed to $4,097 in January, the third-highest level on record and a 15.4% increase from the same time last year, according to a report from Douglas Elliman and Miller Samuel. The median rent in Brooklyn rose to $3,499, a 25% increase from January 2022 and 6% from December, while the median rent in Queens increased 14.2% year-over-year and 19.9% from December.
The rent growth rate is cooling due to waning demand and increasing supply.[0] Demand has slowed due to still-high costs, inflation, economic uncertainty and slowing household formation.[1] At the same time, rental supply has grown due to an influx of construction in recent years and more people choosing to rent out their homes instead of sell.[2]
For 11 major cities, the median rental price decreased in January. In Phoenix, the requested rent decreased the most, decreasing 6.7% in January to $2,016. The rent in Seattle decreased by 1%, now standing at $2,[3] Rent in Austin decreased by less than 0.5%, coming to[3]
Nationwide multifamily rents in January rose 0.4% from the prior month for the first time since August 2022, according to Yardi Matrix.[4] Rents in 2021 rose 6.4% after peaking near 16% in 2021, the highest seen in a century.[5] It is anticipated by the 2023 Yardi Matrix Multifamily Outlook that rent growth will be approaching its historical norm in 2023.[6]
It was anticipated by real estate specialists and analysts that rents would begin to decrease in January following the unprecedented increases in the last months of 2020.[7] Although the economy has declined and layoffs have been seen in finance and technology, the demand for rentals in Manhattan is still strong.[7] For the first time in nine months, the vacancy rate decreased from about 2.7% to about 2.5% month-over-month, and for the first time in three months, the number of new leases increased from 3,159 to 3,441 year-over-year.[8]
The disconnect between wages and housing costs is a major factor in the high rent prices. The wages of tenants are not rising commensurately with housing costs, thus resulting in difficulty to settle their debts.[9] Lower mortgage rates may have drawn some prospective buyers back into the housing market, but the high cost of buying a home is still too much for many.[10]
0. “January rents had the smallest increase since May 2021” FOX 6 Milwaukee, 11 Feb. 2023, https://www.fox6now.com/news/january-rents-had-the-smallest-increase-since-may-2021
1. “Redfin Reports Rents Rose 2% in January—the Smallest Increase in 20 Months – Redfin (NASDAQ:RDFN)” Benzinga, 10 Feb. 2023, https://www.benzinga.com/pressreleases/23/02/b30853255/redfin-reports-rents-rose-2-in-january-the-smallest-increase-in-20-months
2. “Rent in Louisville increased an average of 8% last month, report finds” Louisville Business First , 13 Feb. 2023, https://www.bizjournals.com/louisville/news/2023/02/13/rent-increasing-in-louisville.html
3. “Cleveland asking apartment rents keep rising as national pace slows” Crain's Cleveland Business, 10 Feb. 2023, https://www.crainscleveland.com/real-estate/cleveland-apartment-rents-keep-rising-national-pace-slows
4. “Rent growth flatlines in January” Yield PRO magazine, 8 Feb. 2023, https://yieldpro.com/2023/02/rent-growth-flatlines-in-january/
5. “January Rent Report: Apartment Renters Got A (Tiny) Break …” MENAFN.COM, 14 Feb. 2023, https://menafn.com/1105568818/January-Rent-Report-Apartment-Renters-Got-A-Tiny-Break-House-Renters-Got-The-Shaft
6. “Multifamily housing rents flat in January, developers remain optimistic” Building Design + Construction, 7 Feb. 2023, https://www.bdcnetwork.com/multifamily-housing-rents-flat-january-developers-remain-optimistic
7. “Manhattan rents hit an all-time high in January” CNBC, 9 Feb. 2023, https://www.cnbc.com/2023/02/09/manhattan-rents-record-high-january.html
8. “City kicks off 2023 with rents at or near record highs” Crain's New York Business, 9 Feb. 2023, https://www.crainsnewyork.com/residential-real-estate/new-york-city-kicks-2023-rents-or-near-record-highs
9. “Apartment rental costs in 2023 to slow back to pre-COVID levels” San Antonio Express-News, 7 Feb. 2023, https://www.expressnews.com/sa-inc/article/apartment-rent-san-antonio-17767771.php
10. “Housing Costs Are Still Hot. Where Rent Prices Could Be Headed.” Barron's, 14 Feb. 2023, https://www.barrons.com/articles/housing-costs-are-still-hot-where-rent-prices-could-be-headed-8c3fa1d9
