Even as rents are cooling in some parts of the country, it has never cost more to rent a Manhattan apartment as it did in March.
Typically, rental activity builds from the spring to a peak in late summer, but median rent last month was the highest on record, according to a report from Douglas Elliman, a brokerage, and Miller Samuel, an appraisal and consultant firm.
The median cost of renting an apartment in Manhattan was $4,175 in March. That’s up 12.8% from a year ago and up 2% from February, and marks the highest since last July, when rent was $4,150.
A one bedroom apartment had a median rent of $4,150, up 9.6% from last year, while a two bedroom apartment had a median rent of $5,680, up 18.3% from a year ago. A studio apartment rents for a median price of $3,190, up 16% from last year.
While the median rent for all sizes of apartments taken together has reached a new high, this is not the skyrocketing rent rise seen in 2021, said Jonathan Miller, president and CEO of Miller Samuel.
“It isn’t a rocket ship,” he said of median rents. “It is just creeping higher and every so often it creeps high enough to reach a new high.”
The opposite of rising rents is not necessarily falling rents, it is stabilizing rents, Miller said. The price for new rentals has been bobbing along, not going way up or way down.
“It is part of a long process since the summer. There was expectation that rents would fall and that didn’t happen. Rents peaked last summer. Every month since then, they’ve been moving sideways,” he said. “With a modest increase, it was just enough to set a new record.”
A main driver for rents remaining strong in Manhattan in March is that mortgage rates have doubled from a year ago, making purchasing a home unaffordable for many buyers. In addition, the failure of some banks in March created uncertainty that may have encouraged some people considering buying to rent instead, pushing the prices higher, said Miller.
New leases in March were up 15.4% from last year, according to the report, and leasing activity jumped 20.5% from February.
“The drive in more leasing activity is parallel in the rise in mortgage rates that has continued to push people into the rental market,” said Miller. “Not just the unaffordability, but also the uncertainty.”
Listing inventory for rentals in Manhattan was near record lows a year ago and has been climbing higher. Inventory was up 40.5%, year over year, which enabled more leasing activity.
Even though inventory rose significantly, it is about 10% below long-term norms, Miller said.
Some renters appear to expect prices to climb, since more than half of renters in March opted for a two-year lease, rather than a one-year lease, said Miller.
“If you look at market share of two-year leases, 56.3%, that is the highest since June of 2021 during the rocket ship of rental activity,” said Miller. “What that says to me is that the consumer expects rents to rise going forward and they are locking in rent now as a protection.”
Renters may be on to something there, and can likely expect more highs ahead.
“We’re entering prime leasing season in an already tight market and seasonal pressure may force new records to occur,” Miller said. “I wouldn’t be surprised if we saw a few months where we see more record highs.”