Manhattan renters may have reached their “affordability threshold” in August, as median rents remained at record high, according to a new report.
The median rent in Manhattan in August was $4,370 a month, unchanged from the record high in July, according to data from brokerage firm Douglas Elliman and the appraisal and research firm Miller Samuel. Average rents also held their record, at $5,552 a month.
Brokers said supply is low due to a lack of new rental buildings, while buyers who would normally be looking to purchase apartments are choosing to rent for now given high interest rates. August is historically the busiest month for rentals in Manhattan, as families prepare for back-to-school.
Still, there are signs that Manhattan’s sky-high rents may be peaking. The number of new leases fell 14% in August, marking the second straight month of declines. The drop suggests that while asking rents for new leases are high, renters are balking at the prices. Brokers say many landlords are also choosing to renew their existing leases at slightly higher rents rather than aim for bigger increases with new leases.
In short, Manhattan renters may have reached their price limit.
“The market may have entered an affordability threshold,” said Jonathan Miller, CEO of Miller Samuel. “The market seems to be topping out.”
Apartments are also sitting on the market for a slightly longer period of time, also suggesting a market top. Apartments were on the market for an average of 39 days in August, up from 26 days a year ago.
“I think landlords are becoming more aggressive in retaining their existing renters out of concern about the broader economy,” Miller said.
Still, it’s unlikely prices will come down substantially anytime soon. Inventory levels are falling, giving renters few choices. The number of apartments available for rent declined 24% in August compared to July, and the Manhattan overall vacancy rate is only about 2.4%, slightly below the long-term average.
Many apartments are still seeing bidding wars. About 11% of all leases had a bidding war in August, according to the report. Two-bedroom apartments had the strongest demand, with 13% of two-bedrooms seeing bidding wars. The average rent for a two-bedroom apartment in Manhattan was $6,300 in August.
While Manhattan is extreme in the price and demand for rentals, rents throughout the country remain strong – and are adding pressure to overall inflation. Shelter costs jumped over 7% over last year in the latest CPI report.
According to Redfin, the median national rent in August was $2,052, just $2 below the record-high last year. Redfin said many landlords are “starting to throw in one-time concessions as vacancies rise.”