Are Rents Becoming More Affordable?

The Weekly Recap

After the Fed meeting this week J Pow raised interest rates again by 25 bps which made tech stocks soar, as he signaled the potential for another rate increase for March. Even with the rate increase, the mortgage and bond markets reacted positively and rates are dropping as Powell mentioned the disinflationary process has started. Mortgage rates dropped to the 5% range for the first time since September. Bank of England raised rates half a point, bucking the US as the job market and GDP keeps shrinking overseas. Median rents dropped 6% nationwide during the second half of 2022. US Healthcare companies are ailing thanks to debilitating debt as capital structures become unsustainable. Meta's stock is up 100% from its 2022 low. US job openings hit a five month high in December.

Are Rents Becoming More Affordable?

Rents in the NYC market have skyrocketed over the last 16 months with the average one bed in Manhattan going from $3400 a month to over $5200 a month. A huge influx of demand post covid pandemic and more potential buyers staying in the rental market due to rising rates has created a heated environment of competition, even in the historically slow cyclical time that is Dec-Feb. Soaring rents make it much more challenging to save for a down payment for the purchase of a home but we are starting to see some relief:

• Concessions: Although gross rent prices have risen, the softening of the demand market and the increase in competition created by newer luxury style rental buildings, some buildings such as 70 Pine in FiDi, The Greystone on the UWS and 3Eleven in West Chelsea are starting to offer free months and OP's to allure renters. According to StreetEasy, in December, 17.9% of rental listings in NYC cut asking rents- 6.8 percentage points higher than in December 2021. Concessions were most prevalant in Manhattan, where 21.1%, or one in five, rental listings cut asking rents during December.

• Where are Rents Going: Rental prices over the next 12-18 months will soften as the immense surge in demand wanes and an equilibrium between the tenant and landlord becomes more centered.

• Purchasing Is The Best Way to Hedge: It is always the opinion of this newsletter that purchasing is a way to hedge against lost equity and in limiting the time in which your largest net outflow of capital is rent. The latest StreetEasy data shows that after paying rent, it would take 18 years for a NYC renter earning median wages to save for a 20% down payment on a median priced home in the city ($999,000 as of December). With that stated, there is plenty of inventory under $650k in NYC and in condos, only 10% is required as 90% financing is allowed.

Here are some examples of buildings that are offering concessions as mentioned above, please feel free to reach out if you'd like to explore further or have any questions!

The Greystone Upper West Side

70 Pine Financial District

3ELEVEN West Chelsea

Market Performance

Here are how some other asset classes performed this week as of this mornings opening bell. The Nasdaq and S&P hit five month highs.

Mortgage Rate Update

The Fed raised rates another quarter point after their meeting this week with indications that we could see another increase come March. Even with the rise in rates, banks are still offering rates below 6% as Powell mentioned the disinflationary process has started. If getting pre-approved is something you're interested in to see what rate you can lock in, I'm happy to connect you with several lenders.

Real Estate News You Can Use

• Federal Reserve Raised Rates, Says too Early To Declare Victory over Inflation CNBC

• Powell Says Fed Cannot Save US from Debt Default Bloomberg

• Mortgage Rates Drop to the 5% Range for the First Time Since September CNBC

• How Long is the Lag Between Rate Hikes and Real World Activity MT

• Central Banks vs. The Markets Axios

• US Job Openings Increase to Five Month High in Tight Labor Market Reuters

• How the Pandemic Changed the Rules of Personal Finance NPR

• Markets Bet that Fed is Bluffing on More Rate Increases WSJ

• Rates Now Highest Since October 2007 with Newest Increase YahooNews

• Debt Woes Mount for US Healthcare Sector Financial Times

• ECB Raises Rates Half a Point WSJ

• Hochul Pitches Conversion Tax Break Real Deal

The Deep Insight

Puppy of the Week

Meet Archie! This little spry and vivacious Boston Terrier cannot eat cheese or peanut butter anymore although he loves both. He used to be his parents favorite until they had a baby and now he exists in the background. Archie loves cuddling, absorbing the sun and chasing after his thrown toys. At one point, Archie was able to ring a bell to alert his parents when he had to go outside. Bask in the glory of Archibald Wentworth.

Contact Me

Feel free to reach out to discuss more in-depth about your real estate goals, share your thoughts about my newsletter, or lobby me to have your dog featured as the dog of the week in my monthly newsletter. Looking forward to hearing from you!