In another sign Manhattan’s in-demand housing market has cooled, November’s year-over-year median rent dropped for the first time in more than two years, according to a new study.
The median rent in the New York City borough dropped 2.3% to $4,000 in November from a year earlier, the lowest level since May 2022 and the first annual decline in 27 months, according to residential brokerage firm Douglas Elliman’s analysis compiled by appraisal firm Miller Samuel and released Thursday.
Last month’s median rent fell 4.6% from October, the third-straight monthly decrease since Manhattan’s median rent reached a record high of $4,400 in August. The listing inventory, meanwhile, jumped nearly 30% from a year earlier and the vacancy rate expanded annually for the 14th consecutive month but still remained below 3%, according to the study, known as the Elliman Report.
The drops also echoed CoStar Group’s finding that pointed to New York’s daily asking rent having started to “noticeably trend downward from October into December” as landlords are finding it difficult to keep pushing rents past new all-time highs on a monthly basis.
The results draw broad attention because Manhattan is the most expensive urban area to live in the United States, according to the Council for Community and Economic Research’s 2022 Annual Average Cost of Living Index based on 265 U.S. urban areas. The after-tax cost for a professional and managerial standard of living in Manhattan was more than twice the national average, according to the study.
The Manhattan “rental market has definitely hit an affordability threshold [and] we’re clearly seeing the effects,” Hal Gavzie, executive vice president of residential leasing at Elliman, told CoStar News in an email on Thursday.
He added that “we are seeing landlords offering more concessions like free month rent rather than reducing gross rents. Landlords no longer have the upper hand. … Seasonality appears to be back. Renters are taking their time with their search [as] rental inquiries have slowed considerably during November.”
Fewer Concessions
November’s net effective rent in Manhattan, after subtracting free rent and other concessions that landlords gave, fell to $3,971, down 1.5% from a year earlier and 4.6% lower from October, the Elliman study said.
Still, as renters gain an advantage, Gavzie said rents in Manhattan are still about 15% higher than pre-pandemic levels. Indeed, the share of new leases signed in November with concessions actually declined to 14% from 16% a year earlier even as they ticked up from October, according to the study.
Renters also shouldn’t expect concessions of three to eight months in free rent that some landlords gave during the pandemic that began in 2020, Gavzie previously told CoStar News. More renters are opting to renew leases instead of moving, in part, as the hybrid work pattern that allows employees to work some days outside the office has given them more flexibility to see how the market shakes out, he has said.
Rents also are showing easing signs as the higher interest rates that have pushed more people to rent instead of buy may begin to reverse course, with the Federal Reserve possibly eyeing a rate cut next year, Jonathan Miller, president and chief executive of Miller Samuel, told CoStar News.
“The idea here is that the Fed plans on cutting rates in 2024, which will stimulate the sales market, diverting some demand from the rental market,” Miller said.
By neighborhood, downtown Manhattan, where the median rent was the highest, saw a 2.3% year-over-year drop to $4,395 in November. In contrast, year-over-year median rent on the east side and west side of the city still rose 5.1% to $3,995 and inched up 0.1% to $4,100, respectively. To be sure, both neighborhoods also showed cooling signs as month-over-month rents stayed flat or dropped.
In Brooklyn and Northwest Queens, including such popular neighborhoods as Astoria and Long Island City, the median rents have fallen from their peaks reached during the summer.
New York isn’t the only market showing signs of a slowdown in the rental market. Nationwide, the multifamily vacancy rate, driven by different market factors, has reached a record high of 7.5% amid increased supply, CoStar data shows. U.S. market asking rent, after hitting a record high of $1,682 in the second quarter, also slowed to $1,660.