In recent years, the average rental rates in New York City have skyrocketed, making it second only to San Francisco in terms of renting an apartment. However, the rates have not only slowed in their growth, but have started to dip for the first time since 2009 across the city. The indicators are that NYC is now turning into a renter’s market because of the decreasing demand and increasing number of new apartments that are being built.
Is the Rental Bubble About to Burst?
Considering that rental rates for apartments have gone up across the US over the past several years, the fact that they are tapering off now and perhaps even seeming to dip slightly could be seen as a sign that they might fall. However, it is difficult to look at the fluctuations of the past few months and conclude that a larger fall in rates is on the way. Still, there are signs that the rental bubble may be ready to collapse.
One reason to suspect that rates might be falling fast in the near future is because they are being supported by concessions from owners who offer new renters a month or two of free rent for their apartments. Because the monthly rate is still the same, it has no effect on the average, yet the renter is paying less money as a result. The trend of such concessions is not only widespread across NYC, but in some areas the free rent lasts for up to four months which indicates that a buyer’s market may be on the way.
Another indication is that the fluctuations cannot be accounted for by the seasonal changes that happen every year. There is always a downturn in renter interest during specific times of the year, yet when taking that into account, it still does not explain the general turnaround that appears to be starting. However, it’s also true that rental statistics are usually about two months behind in terms of when they are collected and when they can be examined.
In other words, NYC already be in a decline for rents and the buyer’s market is here. Or, it could mean that this is a temporary fluctuation that may continue in the short term before bouncing back up later in the year. What is true is that over the past year rental rates across the city have been in decline with some reaching the levels they were at back in 2009.
The evidence is still mostly anecdotal as people are reporting what they are paying which may vary from the facts. Plus, there may be other factors involved such as apartments that are falling apart, landlords who are simply greedy, and the supply of new apartments not being discovered. What is true however, is that there is a glut of new apartments, both old and new, in the NYC already with the building of new units only accelerating.
This means that the main factor might be the building boom which ultimately may cause the rent in NYC to truly turn around and fall.