Average rent in the New York City borough of Manhattan surpassed $5,000 in the month of June, according to a recent report from real estate appraisal firm Miller Samuel.
As vacancy rates remained under 2%, average rent in Manhattan reached $5,058 — a 1.7% surge since May and a 29% increase year-over-year — while the average rental price per square foot hit $82.18.
“The rental market continued to show robust conditions, with prices rising to new records as the market share of landlord concession continued to fall,” the report said.
The median rental price of a Manhattan studio apartment has increased 16.7% year-over-year to $2,900, and the median price of a one-bedroom rose 21.2% to $4,000 over the same period. Manhattan’s average weekly wage of $3,967 as of early 2021 was the highest in the country and more than triple the national average of $1,289, according to the U.S. Bureau of Labor Statistics.
Miller Samuel CEO and Columbia University professor Jonathan Miller told The Daily Wire that “inbound demand” is a key driver of the soaring rental prices.
“Office towers are 60% empty, yet rents are going to new highs. Remote has disrupted the tether between work and home,” he explained. “People are going to urban markets for reasons beyond work, countering the false narrative of ‘cities are dead’ that was the story during the early days of the pandemic.”
Manhattan is the economic center of New York City and home to Wall Street, the United Nations headquarters, and other important institutions. In Brooklyn — where weekly wages average $1,014 — average rental prices have increased 20% year-over-year to $3,822.
Beyond New York City, home sales are falling as the median national home sale price surpasses $400,000 for the first time. The 30-year fixed rate mortgage began climbing at the beginning of 2022, according to data from government-backed mortgage company Freddie Mac. Beginning at slightly over 3% in January, mortgage rates neared 6% in June and moderated to roughly 5.5% as of Thursday.
“The spike in mortgage rates has increased rents because the rental market was already tight from a strong economy, and conservative mortgage underwriting is pushing would-be buyers into the rental market more quickly,” Miller added. “Peak rental season doesn’t hit until the end of the summer, so there are likely more increases ahead.”
The rise in mortgage rates occurs as the Federal Reserve tapers its aggressive monetary stimulus. In response to COVID and the lockdown-induced recession, the central bank ramped up its purchase of mortgage-backed securities, leading to a decline in mortgage costs.
In addition to jettisoning the securities from the Fed’s balance sheet, policymakers are hiking interest rates — most recently, by a 0.75% increment in June that represented the boldest action to combat inflation in nearly three decades. After news that the Consumer Price Index (CPI) rose 9.1% between June 2021 and June 2022, two members of the Federal Open Market Committee — which determines the central bank’s policy decisions — indicated that they would be open to another round of large rate hikes.
“If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down,” Federal Reserve Board Governor Christopher Waller said on Thursday. Meanwhile, Federal Reserve Bank of St. Louis President James Bullard told reporters that “it would make a lot of sense” to choose a 0.75% rate hike such that rates increase to around 3.5% by the end of this year.