Rental Activity in Manhattan is Strong in the Spring and Fall, and Property Prices Increase Due to Mortgage Rate Uncertainties, Agent Pricing and Inventory Increases
Typically, rental activity builds from the spring to a peak in late summer, but median rent last month was the highest on record, according to a report from Douglas Elliman, a brokerage, and Miller Samuel, an appraisal and consultant firm.
That means renting an average two-bedroom in Manhattan costs $68,160 a year. Basic utility costs, such as internet, heat and electricity, are included. The national salary was about $60,450.
The market share of two-year leases has gone up since the summer of 2021, said Miller. The consumer expects rents to go up in the future, and they are locking them in now to protect themselves.
The opposite of rising rents is not necessarily falling rents, it is stabilizing rents, Miller said. The price for new rentals has been bobbing along, not going way up or way down.
The reason for rents being strong in Manhattan in March is that buying a home is difficult due to the increase in mortgage rates. In addition, the failure of some banks in March created uncertainty that may have encouraged some people considering buying to rent instead, pushing the prices higher, said Miller.
Since more than half of renters in March decided to go for a two-year lease instead of a one-year lease, there’s a chance prices will go up.
Listing inventory for rentals in Manhattan was near record lows a year ago and has been climbing higher. It enabled more activity because of the increase in inventory, which was up 40.5%.
Wall Street is worried about the US economy: Premarket stock trading in the early morning light of a critical banking crisis, CNN Business and the Bell Newsletter
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It is nearly impossible to enter a recession when spending is growing because consumer spending accounts for about 70% of the economy.
The retail sales report on Friday is expected to show that the American consumer is cooling off and Wall Street is worried about it.
Retail sales fell in March according to economists. But Goldman Sachs and Bank of America analysts say core sales — that’s without autos, gasoline, and building materials — slowed by about 1%. In February, retail sales also fell by 0.4% from January.
The March data come just days after Federal Reserve meeting minutes revealed that central bank economists think the recent banking crisis will tilt the US into recession this year. This is the first time in the current yearlong rate-hiking cycle that Fed economists have forecast a recession.
Spending is cooling on Bank of America credit cards. After starting the year out strong, the bank’s credit and debit card spending eased in March to 0.1% year-over-year growth, said analysts on Thursday. That’s the slowest pace since February 2021.
While there was some fear that the banking sector stress would lead to fewer loans and slower spending, any possible drawback likely has little to do with the regional banking crisis, said the analysts.
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“The slowdown in Federal tax refunds in March, as reported by the Internal Revenue Service (IRS), contributed to the weakness in spending,” they wrote. The IRS issued tax refunds in March of $84 billion, which is $25 billion less than they did in the same month a year ago. According to BofA analysts, that is about 1.5% of monthly disposable income.
Consumers added a total of $398 billion in new debt during the fourth quarter of 2022 — the fourth highest build-up for that period in the past 20 years, and nearly 4.5 times larger than a year earlier, according to a WalletHub survey.
There are also bankruptcies. US corporate bankruptcy filings hit a 12-year high in the first two months of 2023, with 183 companies filing for Chapter 11, according to S&P Global Market Intelligence data.
Credit rating agencies say Bed Bath & Beyond and other chains are on a watch forruptcy. These companies have struggled for years and are most vulnerable to challenging economic conditions.
Andy Jassy, the CEO of Amazon said in a letter to shareholders on Thursday that the company is investing heavily in the technology that underpins chat bots.
“Most companies want to use these large language models, but the really good ones take billions of dollars to train and many years, most companies don’t want to go through that,” Jassy said in an interview with CNBC on Thursday morning.
Since ChatGPT was released to the public in late November, Google, Facebook parent company Meta and Microsoft have all talked up their growing focus on generative AI technology, which can create compelling essays, stories and visuals in response to user prompts.
“What they want to do is they want to work off of a foundational model that’s big and great already, and then have the ability to customize it for their own purposes,” Jassy told CNBC.