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Three Cents Worth: The Ripple Effect When Rents Dip and Rise

This week's chart plots the vacancy rate and landlord concessionsagainst the change in rental prices. To be clear, Manhattan's vacancy rate has remained nominal for decades, hovering around 2 percent, but we get excited when market reports hype up the rise and fall by a few tenths of a percent. The vacancy moves are more subtle than the hype suggests, but they shouldn't be completely ignored.
Understanding the rental market is a little easier if the sales market is seen as a competitor (hint: people either rent or buy, so they affect each other). Last fall's Manhattan rental market saw weaker price trends than the preceding—and current—year. That's the part where the blue line plummets down. While not shown in this particular chart, record sales volume pulled fence-sitters into the buyers' market in 2013, as many feared a spike in mortgage rates. Well, mortgage rates spiked in May 2013 and sales overwhelmed the market, poaching demand from the rental market. Once that excess sales demand was absorbed, rental prices returned to their upward trending ways, rising again last spring. Again, check out the blue line, now on the rise.
To woo renters, landlords reacted within a month of the August decline in prices, offering ... more

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