On account of rising unemployment and falling demand NYC Apartment Rents Fall as Tenants Gain Leverage.
Manhattan apartment rents fell as much as 10 percent in August from a year ago as tenants gained negotiating power in the recession and forced landlords to offer concessions.
In buildings attended by doormen, rents on one-bedroom apartments dropped 10 percent from a year earlier to an average of $3,274 a month, according to a report by the Real Estate Group of New York. Studio prices fell 7 percent at those properties to $2,329 and two-bedrooms declined almost 6.9 percent to $5,161. Soho and TriBeCa were the most expensive neighborhoods.
Rents in Manhattan are falling as unemployment climbs. The number of job seekers rose to 402,200 in July, the most since 1992, New York City’s Comptroller William Thompson said yesterday. Landlords are offering incentives such as free rent and paying brokerage fees to lure tenants, said Daniel Baum, chief executive officer of the Real Estate Group.
“The concessions out there right now are pretty aggressive,” he said.
The city’s unemployment rate climbed to a 12-year high of 9.6 percent in July even as the national rate ticked down to 9.4 percent. The U.S. economy has lost 6.7 million jobs since the recession began in December 2007, making it the biggest employment slump in the last eight decades. Economists surveyed by Bloomberg predict the unemployment rate will reach 10 percent by early next year.
That translates into less pricing power for landlords. U.S. apartment vacancies jumped to 7.5 percent in the second quarter, the highest level in 22 years, according to New York-based research firm Reis Inc. Asking rents dropped 0.7 percent from a year earlier to an average of $1,040 a month.
Home vacancies are up as are rental vacancies. Given the US population is not shrinking, one or more of the following must be happening.
- Young adults are moving back home
- Illegal aliens are moving out of the country
- Households are sharing units
- Builders are still building more houses than there is demand
- Demand for smaller downsized units outweighs demand for larger units
So much for the inflationist theory that rental prices would rise as people lost homes to foreclosures.
Mike “Mish” Shedlock
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