Manhattan’s median apartment rent climbed to its highest level for the month of April as mortgage rates rose above 7% again, discouraging would-be homebuyers and keeping them in the city’s tenant pool.
The median rent gained 3.7% from March to $4,250 and edged up 0.2% from the year-earlier level, according to brokerage firm Douglas Elliman’s monthly report compiled by appraisal firm Miller Samuel. The median rent and net effective median rent, excluding free rent and other tenant concessions, both rose from a year earlier to the highest April on record, according to the Elliman Report.
April’s median rent, compared with other months, ranked as the sixth-highest monthly level in history behind five other higher months in 2023, Jonathan Miller, president and chief executive of Miller Samuel, told CoStar News.
“Because mortgage rates have largely remained stuck at a higher level than expected, it has pushed would-be buyers back into the rental market,” he said.
Amid the uncertainty about when the Federal Reserve may cut interest rates, 30-year fixed mortgage rates have risen above 7% again, leading potential buyers to opt to rent instead of buy, studies have shown.
While other markets, such as those in the Sun Belt region, have seen slowing rent growth amid increased supply, Manhattan’s rent growth comes as New York, the largest U.S. multifamily market, has one of the lowest vacancy rates among major cities in the United States.
Low Vacancy Rate
New York’s apartment vacancy rate of 2.6% trails Los Angeles’ 5%, Washington, D.C.’s 6.9% and the Dallas area’s 10.9%, according to CoStar data.
With potential homebuyers coming back to New York’s rental market, the number of new leases signed in Manhattan also jumped to 5,482 in April — the second-highest April on record — up nearly 15% from March and climbing 42% from a year earlier.
“Many would-be buyers opted not to renew, but because mortgage rates remain stuck at an elevated level, they opted to lease again, hence the surge in new leasing,” Miller said. “There was a lot of this behavior in April, but the number of new leases [has] been rising since November.”
With increased demand, April also had the lowest listing discount for the month on record, reflecting a “premium” renters shelled out, according to the study.
Manhattan is not the only New York market seeing a return of would-be buyers.
In Brooklyn, for example, the median rent rose to $3,599, also the highest April rent on record and up about 3% both from March and a year earlier. The number of new lease signings in the borough surged annually to the second-highest level for the month of April, the study found.