Given all the talk about the recession and financial “Armageddon,” how will New York renters be affected in the near-term? 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 downwards trend has been confirmed by CitiHabitats as well, in the Bloomberg article entitled “NYC Apartment Rents Fell in November, Vacancies Rose.” With all these changes, how will NY renters be affected? And will rents continue to fall? While Rent Hop can’t exactly predict the future of the economy, we hope the following tips will be helpful in your search:
1) Renters should take their time to look for the “perfect apartment.”
Renters should now be much more selective in choosing their apartments. Only recently, we’ve hit the perfect storm for rental weakness. While back in mid July/August there were lingering inflation fears from the higher oil and weaker dollar, these concerns have been dispelled. Increases in aggregate layoffs and lease rollovers [especially as we get past 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 1 to 2 years of a lease.
2) 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.
3) 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. Rent prices could easily decline through 2nd half 2009. As a result, it might be prudent to enter into a 1-year instead of a 2-year lease. First off, this gives the renter extra flexibility in case they need to relocate. Typically, lease contracts will either have a “lease termination fee [amounting to 1 or 2 months of rent]” or force the occupant to keep the contract [renters will have to pay until the lease ends]. If rents do continue to drop, subletting your apartment at market will cause a loss over the term of the lease! As an example, if you have 6 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 Rent Hop isn’t here to help renters speculate, flexibility and optionality are always a plus.
