Rents Fall in NYC; What’s Next For Boston?

This article titled Why Are These Renters Smiling, in the current New York Times details the drastically falling prices in all burroughs of the Big Apple.

Rents are down throughout New York. According to the February Manhattan Rental Market Report produced by the Real Estate Group, a New York brokerage firm, rents in the borough have fallen “across the board.” The biggest drop was in studio apartments in doorman buildings, which have fallen 8.33 percent from the same time last year.

Some facts gleaned from the article which may have significance in our market as the forces at work in the economy continue to alter the rental landscape:

1. Broker Fees shift towards the property owner. (sometimes a split between owner and renter, sometimes purely paid by the owner.)
2. Rather than officially lower rents, many landlords give away a free month or two of rent when signing a lease. I guess this lets everyone pretend rents are falling to try to prop up the market. (Foolish humans.)
3. Renegotiating rents with your current landlord may not work; you may be better off moving to save money. (Landlords may not be willing to admit how much times have changed.)
4. Credit scores become less important to some landlords desperate for tenants.
5. Renters often ‘trade up’ at the same price point, into better places in more desirable locations.

NYC may be a special case; it is obviously suffering hugely from the financial meltdown as many of the lost jobs in that industry were concentrated in that region. At any rate, we do not expect to see another year of increasing rents in the Boston Metro Region.

“We know we’re still sitting on a bubble,” said a worried Realtor to me the other day. “Everyone knows it. The only question is, when does it pop, and how far does it fall?”

She was speaking about the home sales market, of course, and dislocations there can have the perverse effecct of temporarily increasing rents as housing stock sits empty while stubborn property owners refuse to take a haircut. So nothing is cut and dried here, in the short term. We’re thinking that dropping rents will be a good sign that the crisis in the housing industry is working it’s way through the economy as owners and property managers adapt to the new environment.