How will a recession and financial “Armageddon,” in New York City affect the rental market? Well, let me say straight up that rental prices are down significantly year-over-year, with November rents for doorman and non-doorman prices down around 2.5 and 8.5 percent! [for more details, renters should refer to the TREGNY Manhattan Rental Report]. This downward trend has been confirmed by CitiHabitats as well, in the Bloomberg article entitled “NYC Apartment Rents Fell in November, Vacancies Rose.” How will the weakening economy affect New York City apartment searches? And will rents continue to fall? While RentHop can’t exactly predict the future of the economy, we hope the following tips will be helpful in your search:
Renters should take their time to look for the “perfect apartment.”
Renters should now be much more selective in choosing their apartments. Only recently have we hit the perfect storm for rental weakness. We’re no longer concerned like we were in mid-July/August about lingering inflation from the higher oil and weaker dollar. Aggregate layoffs and lease rollovers in the “slower months” between November and March should introduce excess supply into the market. Not only can renters afford to wait, but there should be more “bargain” apartments as the supply increases! Renters should also take advantage of potentially subletting if their horizons are shorter than the standard one to two years of a lease.
Management Companies have begun to lower prices and offer special deals.
In the listings that we track, we’ve found that landlords have become increasingly willing to not only lower prices but also include “owner pays broker” or “one-month free” type deals. Renters, beware, though! If you go through a broker and end up with a “no fee” apartment, you might be forfeiting the 1-month free. This one month amounts to ~7.6% discount over the 13 months. While there are a number of management companies still holding out, renters should take the opportunity to either negotiate or submit a lower bid in their application.
Renters should consider shorter leases given weakening rental markets.
While there is no doubt the economy will be stronger, short-term conditions still look weak in New York City. Rent prices could easily decline through 2nd half 2009. As a result, it might be prudent to enter into a one-year instead of a two-year lease. First off, this gives the renter extra flexibility in case they need to relocate due to the weakening economy. Typically, lease contracts will either have a “lease termination fee [amounting to one or two months of rent]” or force the occupant to keep the contract. If rents continue to drop, subletting your apartment at market will cause a loss over the term of the lease! As an example, if you have six months of your lease left, and are paying $1,500 per month, you’ll lose $100 X 6M = $600 if you’re forced to rent out at $1,400. While RentHop isn’t here to help renters speculate, flexibility and optionality are always a plus.
Editor’s Note: This article was originally published in December 2008. The article has bene updated for readability, but the content has not changed.
