Manhattan Rentals Soar Despite Cooling Economy

February 09, 2023

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What you should know:

Manhattan median rental prices hit a new high in January with a 15% increase to $4,097, compared to the previous year.
The rental market remains strong despite the cooling economy and high-profile layoffs in finance and tech, driven by a strong job market and limited supply of apartments.
New leases in January rose 8% over December and 9% over January 2022, indicating that renters are still willing to pay high prices.
The vacancy rate of available apartments remains low, with a rate of 2.5% last month compared to the typical 3% for Manhattan.
Rental demand is especially high in luxury rentals, with nearly one in five luxury rentals in January resulting in a bidding war. Analysts predict that rents will not decrease unless the economy and job market lose steam.

Housing Market Showing Signs of a Rebound

The US housing market showed a rebound with a rise in mortgage loan application volume, which increased 7.4% from a week earlier.
The 30-year fixed mortgage rate fell for a fifth straight week to 6.18%.
The Purchase Index increased 3% from one week earlier, with the average loan size on a purchase application reaching $428,500, the largest since May 2022.
The Refinance Index rose 18% from the previous week, due to lower rates.
Although overall applications remain 58% lower than a year ago and rates are still significantly higher, the recent trend in purchase and refinance activity is a step in the right direction, according to Joel Kan, MBA’s Vice President and Deputy Chief Economist.

A luxurious 9,700 square foot mansion located in the gated Las Vegas community of the Ridges is up for sale for $6.5 million.
The highlight of this property is a recreation of a street in Italy in the backyard of the home.
The cobblestoned lane includes a restaurant, a chocolate shop, and a wine and cheese shop, all named after the owners' children.
The main home also features a fireplace-equipped living room, a primary bedroom with a gym, private balcony, and firepit, an outdoor kitchen, a pool, and a basketball court.
The basement includes a home theater and a temperature-controlled wine room that can hold up to 600 bottles.

A 30% drop in housing permits over the past three quarters may indicate a weakening U.S. economy and drive the country into recessionary territory.
The U.S. housing market is sensitive to interest rates, and rising mortgage rates, combined with increasing home prices, have decreased affordability metrics to multi-decade lows.
The threat of higher interest rates is likely to be muted compared to history due to changes in mortgage financing, healthier creditworthiness of borrowers, and strong consumer balance sheets.
Despite the slowdown in housing prices and transaction activity, construction activity has held up and is likely to continue, but may lead to layoffs in the construction industry in 2023.
The National Association of Home Builders survey suggests that more pervasive layoffs may be likely in 2023, indicating a potential downturn in the economy, but the extent and timing of the downturn is unclear.

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