Will History Repeat Itself? It Usually Does

By
Real Estate Agent with Compass

During this past year the rental market in Manhattan has become very tight. Rents are soaring, multiple applications and even bidding wars have been going on. Many buyers gave up on buying and decided to rent instead.

Flash back 3 years ago. Landlords were offering 1 -2 months free rent, paying broker fees anything to rent their units. Ads were not pulling. No one was renting everyone was buying. It was cheaper to buy than to rent.

Rents are now skyrocketing. I have heard of landlords asking 20-25% increases in rent when a lease expires. Landlords used to increase 4-5% a year even in non stabilized units. Is it worth all the expenses involved in moving to another rental apartment? Will there become renter's priced out of the rental market who will now buy instead? 

My suggestion to renters who are not ready to buy just yet - but would like to buy - Should be looking to new construction. There is going to be a glut of new condo units. Many of these developers are offering consessions to buyers but still not lowering prices. They need a certain price so they rather wait out the market?

If history repeats itself like it always seems to do some of these condo buildings are going to start renting. They will probably rent them for a few years and then offer the renters an insider price when they decide to sell.

This is exactly what happened in the early 90's. Many of the new condos that were built in the late 80's (the last construction boom) were not even half sold so they rented the unsold units. In 1993 many of these renters were offered insider prices to buy their units at even lower prices than the people who bought in 1988 -1989. I was a buyer in 1989. I bought at the top of the market. There is no guaratee that this will happen again. But I tend to think history does repeat itself.

The fundamentals still support the market in Manhattan. The local economy is still strong. Supply and demand determine price and the direction of the market. We are in a classic over supply situation. Three years of inventory that needs to be absorbed. After inventory adjustment fundamentals will reassert themselves.

We are experiencing a short term glut that equals a long term opportunity. A buyer's market for the next 24 months. The best buying opportunity since 1993.

 

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Rainer
36,693
Sara Lipnitz
Max Broock Realtors - Birmingham, MI
I always say... what is old is new again.  I say this as I see young girls wearing what I wore in the 80's.  Always interesting!
Sep 06, 2006 12:13 PM #1
Rainer
463,655
Maureen Francis & Dmitry Koublitsky
Coldwell Banker Weir Manuel - Bloomfield Hills, MI
Coldwell Banker Weir Manuel

I think we have the tendency to remember the past as being something better than it really was, especially if something we don't really like is taking place now. 

Yesterday the owner of our company was talking about how in the almost nobody could get a mortgage here during the slowdown in the late 70's.  I wasn't doing this then, but his perspective was interesting.

Sep 07, 2006 12:49 AM #2
Rainmaker
197,731
Roberta Murphy
San Diego Previews Real Estate - Carlsbad, CA
Carlsbad Real Estate and Homes
The tight rental market is all part of the cycle. Many frustrated sellers will turn their properties into rentals--which will eventually balance inventory levels in both the rental and listings markets.
Sep 07, 2006 02:41 AM #3
Rainer
214,117
Eddy Martinez
Nationwide Funding Group - Highland Park, CA
With such bidding warrs rental rates must be very high. Is there rent control in Manhattan?
Sep 07, 2006 06:47 AM #4
Rainmaker
599,330
Mitchell J Hall
Compass - Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Rent control is almost non existent today. There are people still in rent controlled apartments. They got them 15- 30 years ago. Many of the buildings turned coop or condo and they were non evict - you can't evict the rent controlled tenants. However, if they move or die those units are sold or rented market prices.

There are people in rent stabalized apartments again they got them many years ago. If they move out and if the landlord renovates they can charge market rent. Once the rent stabalized apartment reaches $2000 a month and the tenant's income is $175,000 or more they are no longer rent stabalized apartments.

Anyone looking for an apartment today pays market rent. 1 Bedrooms are around $3,000 per month and up 2 bedrooms about $5,000 a month and up.

The bidding war I was referring to was a high end rental for $10,000 per month.

Sep 07, 2006 09:18 AM #5
Rainer
133,865
Peter Andres - Lic. in FL & NY GRI,SRES,CNE
REALTOR - The Villages, FL

Growing up in Queens and College in Manhattan, I would have loved to work Manhattan the last couple of years but I chose Long Island(where I live) and it wasn't too shabby the last couple of years. I remember getting 3 co-op units in the East 80's for $125K TOTAL.

What goes around usually comes around...disguised with a twist. 

Sep 09, 2006 03:33 AM #6
Anonymous
BRian Schmidt
What hard data do you have to back up the assertion that we have 3 years of inventory to work through?
Mar 02, 2008 01:02 PM #7
Rainmaker
599,330
Mitchell J Hall
Compass - Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn
We don't anymore. This post was written 9/06. 2007 was a very strong year.  Inventory is actually down now.
Mar 03, 2008 12:41 AM #8
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Rainmaker
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Mitchell J Hall

Lic Associate RE Broker - Manhattan & Brooklyn
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