Rent in New York City is ? and is likely to remain forevermore ? quite high, but such is the cost of living in the most exciting city on Earth. However, in recent weeks, the behavior of rental prices has caused many to scratch their heads.
Last year was unequivocally the most expensive New York has ever been, but the first few months of 2016 have provided an end (or a hiatus, at least) to the meteoric rise of rental prices. What is causing this sluggishness, and is it a cause for celebration or alarm?
Last Year’s Spike
Before we can dive into understanding the current behavior of New York real estate, we must explore the recent history of the renter’s market. Nearly since the Great Depression of the ‘30s, real estate prices have seen steep inclines, and despite the Great Recession of the late ‘00s, the market has only continued to grow. During the fourth quarter of 2015, prices reached an all-time high, reports Elliman (the largest and nearly the oldest real estate company in the city). The median sales price of a home in Manhattan stretched to upwards of $1.9 million ? an astronomical amount compared to the national $188,900, and an increase of more than 12 percent over Manhattan’s prices for 2014. The median price of a Manhattan home is also sky-high at over $1.1 million, a figure which is corroborated by a number of other regional firms.
The cost of buying a home wasn’t the only major spike in prices. Apartments, condos, and co-ops all felt a significant rise in price, as cost per square foot in Manhattan reached a record-breaking $1,645, which was a meteoric jump of over 28 percent from the previous year. Yet, driving prices even higher, closings were occurring faster than ever before; the average property remained on the market for a mere 82 days, which is a whole 20 days fewer than 2014.
Though experts are not certain what caused such a dramatic increase, most have an idea: luxury developments. Some companies (like Raphael Toledano NYC real estate company, Brookhill Properties) are opting to completely renovate older buildings and turn them into upscale apartment complexes, for which there is stable demand in the market. However, inventory of new, luxurious developments is low ? it actually decreased 10 percent in 2015’s third quarter ? while demand continues to rise, causing such a massive upswing in prices for the rest of New York’s real estate.
This Year’s Stagnation
Thankfully, a review of the market in early March found that the steaming rise in real estate prices has started to cool. Both January and February maintained similar prices to the previous month rather than rising incomprehensibly higher, which Ellison takes as a good sign for stability for the rest of 2016.
A handful of other signs point to a healthier year for Manhattan real estate. For one, landlords already seem more willing to negotiate with tenants. Roughly 24 percent of the city’s real estate transactions included a concession from the landlord, showing that prospective renters and buyers are wielding more power in the market.
Time on the market is steadily increasing, as well, as the hot and heavy desire for luxury development is beginning to mellow. In Queens, the average vacancy period has nearly doubled in the course of a year. Meanwhile, prices for new, luxury apartment space in Manhattan decreased more than 5 percent since this time last year. One expert contends that this market is quickly becoming the weakest, as supply increases but demand remains the same.
Unfortunately for buyers and renters, the market remains stable ? which means rent and property prices probably aren’t going to decrease anytime soon. The average rent in Manhattan steadily approaches the $4,000 mark, which is still just barely affordable for most New Yorkers. Though this is an indication of a strong and healthy market, it is also distressing for those hoping to upgrade from a Queens walk-up to a luxury development in the East Village.
Change is the only constant in the New York real estate market, so the current stability likely won’t last too long. However, whether we will see another breathtaking rise or a heart-wrenching plummet in prices is yet to be determined.