As the summer heat broke in Manhattan in August, so did a streak of record-breaking rents.
Median rent for a new, brokered lease in Manhattan last month fell to $4,600, according to the monthly rent report from Douglas Elliman and Miller Samuel. That’s a 2 percent decline from the peak reported in July.
So ends a period of record-high prices that began in February. The numbers reflect the forces beginning to moderate rents in the city, including falling mortgage rates. But just because rents aren’t rising, doesn’t mean they’re likely to fall significantly, according to report author Jonathan Miller. Manhattan rents in August were still the third-highest in history and have increased more than 8 percent in a year.
“Pretty significant price growth is being maintained,” said Miller.
Thirty-year mortgage rates fell to their lowest level since October last month. When those rates come down, that entices would-be renters to consider buying a place of their own and, in turn, removes some demand from the rental market.
But it’s still fairly surprising that a new record wasn’t set in August, considering it’s typically a high-demand season, according to Miller.
“Rents started banging against the wall of records beginning in January,” he said. “That’s what makes this year so unusual is that it’s had a defiance of seasonality.”
The Federal Reserve is widely expected to cut interest rates at its meeting next week, which could moderate mortgage rates — and potentially rents — further.
Another factor perhaps influencing rent movement is the FARE Act, the city law that prohibits brokers from charging fees to tenants who didn’t hire them, after it went into effect in June. Listing inventory as measured by the report fell in both Manhattan and Brooklyn, as brokers and landlords may be working out how to comply with the law. Listing inventory in Manhattan fell 10 percent month over month, and 13 percent in a year.
The Elliman data only includes new leases. It doesn’t capture any increases in lease renewals, which account for about two-thirds of leases in Manhattan, according to Miller.
The FARE Act may be enticing landlords to pursue those renewals, according to Allia Mohamed, CEO of the renter platform openigloo. Landlords with units already filled might see the value in avoiding a potentially hefty broker’s fee. Historically, openigloo data shows rent increases associated with lease renewals are typically modest, around 5 percent year over year.
Although rents fell in Manhattan, Brooklyn was a different story. The median rent for a new, brokered lease reached $3,950, an all-time high. (Trends in the borough are often just slightly behind those in Manhattan, Miller said).
Nabbing a rental remains competitive. About one-third of new Brooklyn leases were subject to bidding wars, which raised prices on those units an average of 11 percent. In Manhattan and Northwest Queens, about one-quarter of leases were signed after bidding wars.
In Northwest Queens, the median rental price reached $3,775, a 0.7 percent increase from July and a 6.6 percent increase over last August.
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