As Manhattan Rents Hit Another Record High, Why Do Prices Continue to Break Records?

The Weekly Recap

The NYC rental market continues to hit new record highs for pricing, economists are feeling pretty good about inflation and investors are bullish on the idea that a debt ceiling limit deal will be reached. The MTA reported hitting 4 million daily riders for the first time since March 12th 2020. Retail sales rose for the first time in three months in April, 65% of fund managers believe we are heading towards a recession, home prices posted largest annual drop in more than 11 years, consumer debt has hit a whopping $17T in Q1, CEO of OpenAI Sam Altman testified before congress about AI's need for regulation as well as the potential horrors of a future run by terminators and Twitter announced that it's hired Aunt Linda as their new CEO.

As Manhattan Rents Hit Another Record High, Why Do Prices Continue to Break Records?

Another rental report comes out about the health of the NYC market and it's another report that declares that rental prices have hit another record high. As reports of the back to the office movement retreating, and an outflow of some New Yorkers to other markets like Florida and Texas, how can rental prices continuously, month over month break records? Aren't prices dictated by supply and demand? And how can there be increasing demand if people still are not in the office and are leaving NYC? We can draw a straight line from an increase in rental prices to rising interest rates.

It might seem counterintuitive to believe that mortgage rates are impacting a market where you, well, don't need a mortgage to rent. But what high rates are doing is keeping MORE people IN the rental market than turning those renters into first time homebuyers. With these people remaining in the market and not moving on to homeownership, its causing rental prices in Manhattan to be up 8% year over year, Brooklyn is up 14.8% YOY and Queens is up 12.8% YOY.

Renters are renewing leases in droves as only 12.9% of new landlord listings are offering concessions such as free months or paying the brokers fee and with limited inventory on the market, it's another reason why people are staying put. Although the back to office movement is slowing, office occupancy is higher now than it was last year and the attrition rate of people leaving NYC has slowed as we have completely come out of the Covid recovery.

The phrase 'high interest rates' tend to scare people away from purchasing. Even with rates hovering around 6.4%, we are still way below the historical average of 8% for a mortgage. Rates are the short term cost of borrowing money where owning real estate is a long term investment strategy. As rates go lower they can always be refinanced. Rent is now and always will be the single largest net-outflow of capital for any individual, so if you find yourself stuck in this cycle of paying tens of hundreds of thousands of dollars a year in rent, paying someone else's mortgage, let's talk about getting you out of it and creating equity and wealth for yourself!

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts that have taken place over the last week.

Mortgage Rate Update

The 30-year fixed-rate mortgage averaged 6.39 percent this week, as economic crosscurrents have kept rates within a ten-basis point range over the last several weeks. After the substantial slowdown in growth last fall, home prices stabilized during the winter and began to modestly rise over the last few months. This indicates that while affordability remains a hurdle, homebuyers are getting used to current rates and continue to pursue homeownership.

News You Can Use

• Manhattan Rents Reach Another Record High CNN

• Home Prices Posted Largest Annual Drop in More Than 11 Years in April WSJ

• Manhattan Rents Top All-Time High NY Post

• NYC Skyscrapers Sit Vacant, Exposing Risk City Never Predicted Bloomberg

• Can These Recent Private Equity Deals Actually Save Commercial Real Estate Globest

• Who's Not Sweating the Debt Ceiling? The Markets Bloomberg

• CEO's Thought the Return to Office Debate was Over. It Looks like They Were Wrong CNBC

• Why America Needs Regional Banks CNN

• Plunging Tax Revenue Accelerates Debt-Ceiling Deadline WSJ

• The Greatest Wealth Transfer in History is Here NYT

• The Markets (Still) Don't Believe the Fed Axios

• Consumer Debt Passes $17 Trillion For the First Time Despite Slide In Mortgage Demand CNBC

• What Happens If The Debt Ceiling and the Banking Crisis Collide? CNN

• Jamie Dimon Says it's 'Unlikely' that JPMorgan Chase will Acquire Another Struggling Bank CNBC

• The Fed Breaks Out It's Old Toolbox Axios

• Twitter's New CEO Says She's Excited to Transform Platform Bloomberg

The Deep Insight

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