Rents are down 8 to 10% in New York City.
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As nearly 1 million rent-stabilized apartments in New York City receive a rent freeze in the midst of the coronavirus pandemic and economic fallout, landlords with market units are reducing rents by nearly 10% amid lower than usual demand.
Zillow Z -owned New York City listing site StreetEasy recently found what it called a “significant increase” in the number of rentals offering a discount in May, an early sign that rents could soon start to fall.
According to the StreetEasy report, 24% of NYC rentals were discounted last month. That was a nearly 10% jump from May of 2019, when, only 15% of rentals were discounted.
Additionally, the size of the median discount rose from 4.8% of the median asking rent last year to 7.9% this May.
Manhattan saw the biggest discounts, with 26.8% of rentals in the borough seeing a price cut. This will likely continue, as living close to Manhattan offices become less of a priority for New Yorkers who can work from home.
The drop is expected to continue, even as New York enters Phase 2 reopening on Monday and showings can continue.
“The growth in rental discounts is a strong indication that demand for apartments in New York City is declining overall, and demand will likely continue to remain low as new hires and students start jobs and school remotely, and as New Yorkers flee the city seeking affordability or due to job loss, says, StreetEasy economist Nancy Wu. “Though rents have been rising for years, this drop in demand could result in New York City rents falling soon.”
The trend in New York is mirrored across the country, with rents falling in in 16 of the largest 35 markets, according to Zillow.
Real estate agents have been seeing early signs of falling prices.
“Phones usually would be ringing off the hook,” says Aleksandra Scepanovic, managing director of Ideal Properties Group.
Ideal has been working with landlords to let them know that they are likely not going to see rents increase, but that they should be expected them to be stable or be reduced by 8 to 10%. Landlords are also advised to pay for broker fees, which some people may be struggling to pay due to unemployment or reduced pay during this time.
“We’re seeing landlords looking to hold onto rent-paying tenants,” Scepanovic explains.
While StreetEasy has suspended the Days on Market countdown, agents are seeing apartments usually on the market for a week are now taking nine to 10 days to rent, meaning landlords can potentially lose an additional month’s rent.
Landlords are also offering concessions. Some are deferring security deposits until later in the lease cycle, or prorating the deposit and including it monthly, offering a free month’s rent or taking pets when they normally would not.
Some landlords that were adamant about not allowing in-unit washers and dryers are now reconsidering, or at least pivoting to offering an on-premises laundry room, Scepanovic says.
Wu of StreetEasy says potential renters can use the current market to their advantage.
“If there is an advertised discount on a unit, that’s a sign of a motivated landlord,” Wu says. “Regardless of whether a unit has already experienced a rent cut or not, it’s always a good idea to negotiate further before signing a lease.”