Michael Holt | October 10, 2022
The rental market in New York City has been on a steady incline for some time now, with prices reaching all-time highs. However, it seems that the market is finally cooling off, as affordability becomes an increasingly pressing issue for New Yorkers.
A recent study found that the majority of New Yorkers are spending nearly half their income on rent, far exceeding the recommended 30 percent threshold. And this is particularly true for those earning lower incomes – in fact, for those making less than $35,000 a year, the average rent costs account for more than 80 percent of their income!
So what’s causing this sharp increase in rental prices? Well, part of it is simply due to the increasing demand for housing in NYC. The city’s population has been booming in recent years, as more and more people are moving here in search of opportunity. And with a limited supply of available housing stock, it’s no surprise that rents have been going up as well.
However, another key factor driving up rents is the current state of the sales market. With home prices predicted to decline in the coming months, many landlords are choosing to rent out their properties instead of selling them. This has resulted in an abundance of rental units on the market, which has put downward pressure on prices.
All things considered, it looks like the rental market is starting to rebalance itself after years of runaway growth. The city-wide median monthly rent has plateaued -- from $3,575 in August compared to September the rate went to $3,500 a month, a hopeful sign for tenants within the red hot rental market to have changing headlines from "rents rise" to "rents decreased". This cooling off was much needed, as the rental market had become increasingly unaffordable for the average New Yorker. In fact, the majority of residents are now spending nearly half their income on rent – a situation that is simply not sustainable in the long run (the normal rate is roughly 30% of one's income). The rental market can't always be rising year over year but we have a long way to go before landlords start offering major perks and slashing rents to lure renters. Rising mortgage rates will only contribute to rent growth as the median monthly mortgage payment will deter buyers.
While it's unclear whether this cooldown is simply a seasonal trend or a longer-term shift, one thing is for sure: New Yorkers are increasingly worried about what's next. With the sales market forecast trending down, many people are starting to fear that they may be priced out of the city altogether.
This is a valid concern, as the cost of living in New York City continues to increase. If you're thinking of making the move to NYC – or if you're already a resident – it's important to be aware of these shifting trends and plan accordingly. New York City rents should get some relief as buyers become enticed to take advantage of dropping sale prices and when the FED starts decreasing rates. This will take time.
There are still plenty of great apartments available in this city, but you'll need to be prepared to move quickly when finding them as many other people are looking for housing just like you.
1. Start your search early: The earlier you start looking for apartments, the better your chances of finding something that fits your budget. Keep in mind that inventory changes quickly in New York City, so don't wait too long before starting your search.
2. Be flexible with your requirements: Don't be too rigid about what you're looking for in an apartment – be willing to compromise on things like location, size, and price. Remember, there's no such thing as a perfect apartment – so don't let your perfect dream home turn into a nightmare by overspending or settling for something that's not right for you.
3. Think outside of Manhattan: While Manhattan always has the most expensive apartments, there are plenty of great deals to be had in Brooklyn, Queens, and other parts of NYC. Don't rule out these areas just because they're not Manhattan – you may be surprised at how much bang you can get for your buck.
4. Work with a professional: If you're not already working with a real estate agent, now is the time to find one. A good agent will have access to listings that aren't yet on the market, which gives you a major leg up in the race for NYC apartments.
5. Be prepared to move quickly: When you find an apartment that you like, be ready to move on it immediately. In this competitive market, the best apartments don't stay on the market for long – so if you snooze, you lose.
Are you wondering if buying an apartment would be a smarter option? Consider these points:
1. It's a buyers' market: With prices predicted to decline in the coming months, now is a great time to buy an apartment in NYC. Seeing prices are heading down it's important you find a residence with previous comparable sales that support a higher valuation.
2. You'll have more negotiating power: Since there are more apartments on the market than there are buyers, you'll be in a strong position to negotiate a lower price for your new home.
3. Date the rate, marry the price: If you're concerned about interest rates rising in the future, buying an apartment now allows you to lock in a lower rate but don't forget you have the ability to refinance in the future for when the rate lowers. The important aspect is finding a great deal.
4. You may be able to get a tax break: Depending on your situation there are certain tax incentives.
5. You'll build equity: Unlike renting, when you own an apartment, you'll build equity over time as the value of your home increases. This can provide you with a nest egg for the future or a down payment on another property or have the ability to pull out cash (tax-free) when you refinance.
6. You'll have more control over your living situation: As a homeowner, you'll have the freedom to make changes to your apartment to suit your taste and lifestyle. If you're renting, you'll need to get permission – and often pay a fee – from your landlord.
If you'd like to learn more about what's going on in the sales market click here to read my latest blog post, contact us to learn what makes us top real estate agents in NYC or check out our guides, Success Stories, and more! Good luck!
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