Landlords Feel More in Control – But for How Long?

Another article from the New York Times has come out championing the Landlord’s upper hand in what might be ‘a sign’ of a recovering economy.  Concessions for new renters – items like free rent or paid-for broker’s fees – are trimming down as inventory has shrunk from over 2% a year ago.  When times are rough and the outlook bleak, landlords will do what they can to entice renters to take an apartment, choosing lower net rent for the year over no rent.

If you look at some of the stats, it would seem that Landlords have been doing well – south of 23rd street we are seeing a near absence of concessions.  Houston to 23rd has become extremely popular from the far east to west side, and with inventory at near lows people are facing more competition from fellow renters.  Landlords are happy to have renters duke it out for thier apartment.

But should they be feeling so confident?

Vacancy rates are no longer at their minimums.  After the West Village broke the lower side of 0.3% in Spring August saw it rise to 0.5%.  Manhattan-wide vacancies were as low as 0.8%, now they are hovering around 1.1%.  So why are Landlords denying concessions?

Perhaps they are just reacting to decreasing inventory of the summer late in the game, or perhaps they are optimistic about the future.  Well, late fall and winter does the rental market no favors, and with a net drop in jobs in New York for the summer there is not necessarily a boom of new cash  on the way.  As well, some people project that Wall Street bonuses will be trimmed down.  While bonuses affect the sales market more directly, the amount of money flowing into property in general effects renting too.  If more units are transacting at higher costs, the value of property rises and so do the rates.  If sales inventory is stagnant and suffering repeated price cuts, rentals generally follow suit.

While the stats for the end of summer do not seem to support a rising rental market, one group of individuals is helping boost the middle range market.  This demographic is the new buyer crowd.  With security in question for their first biggest purchase, many people who would be looking at a starter home, say a $650,000 1 Bedroom, have instead taken that mortgage payment and applied to rent while they see where the market is going.  This often translates to about $3,200-$3,500 per month.

So if you are looking for an apartment, know that finding a no-fee place with a month of rent free may be difficult.  While the monthly rental price is still in a good place (thinking value now relative to a couple of years ago),  you just wont find landlords clamoring for your business.