The Housing Market Is Open 24 Hours…
…just not in a row.
But I digress…
Rental Prices In NYC Continue To Confound By Not Falling
I’ve been the author of an expanding series of reports for Douglas Elliman since 1994, covering more than 40 U.S. housing markets. Most are quarterly, but our rental market coverage is monthly (along with our new sign contract reports).
NYC rental market price levels have plateaued since peaking last summer, largely because of a strong economy and rising mortgage rates (pushing would-be buyers into rentals).
Given the weakening trends observed nationwide, the idea of high NYC rental prices being sustained is of great interest in the financial markets. The Bloomberg piece: Manhattan Apartment Hunters See No Relief From Near-Record Rents, reported on our February 2023 results, was the 10th most-read article on the 325K Bloomberg Terminals worldwide.
And they had a chart that clearly illustrates the rental price plateau since peaking last summer.
Elliman Report: February 2023 Manhattan, Brooklyn & Queens Rentals
MANHATTAN RENTAL MARKET HIGHLIGHTS
“Rents have continued to move sideways since peaking in the summer as new leasing expanded sharply.”
- Net effective median rent rose annually for the eighteenth straight month and was the highest February on record
- The highest annual rise in new leases in nineteen months
- Listing inventory fell month over month at a higher rate than the February decade average
- Non-doorman price trend indicators continued to see a higher year over year increase than doorman price trend indicators
- New development new leases rose year over year at two times the rate of non-doorman rents
- Luxury median rent remained at the third highest on record
- Luxury premiums paid over landlord ask was nearly twenty percent
- Luxury listing inventory is expanded from last year’s record low but remains below pre-pandemic levels
BROOKLYN RENTAL MARKET HIGHLIGHTS
“Rents fell after reaching record and near-record levels in January as new leasing surged.”
- Net effective median rent rose to the highest level for a February on record
- New lease signings increased annually for the first time in five months
- Bidding war market share has remained at about one in five new leases over the past year
QUEENS RENTAL MARKET HIGHLIGHTS
“Average and median rents rose annually to the highest February on record.”
- Average and median rent rose to their second-highest levels on record
- The market share of two-year leases reached an all-time high
- New leases reached their second-highest level for a February on record
Rental Lease Length As A Forecasting Tool: NYC Tenants Think Rents Will Rise
There was a broad expectation by tenants and media coverage that rents would fall once rents peaked last July. This was seen in the plunge in the market share of 2-year leases. Why lock in for a longer term when you think rents will fall? After October, tenants pivoted back to 2-year leases as it became clear that rents would not significantly decline. By this February, the market share of a 2-year lease returned to the 50% threshold as rents continued to flirt with the records set last summer. The market is moving closer to the spring and summer markets, typically the peak of pricing any given year. A similar pattern emerged in the other boroughs we report on as well.
The Rental Price Gap Between Manhattan and Brooklyn Is Expanding!
Brick Underground explains why: Gap widens between Manhattan and Brooklyn median rents as demand for luxury rentals surges
But not the spread between Brooklyn and Queens rents (I’m just giving an excuse to show another cool chart).
The Compass Chronicles: March 2023 Edition
A continuing saga…
Mike DelPrete, who came out of nowhere a few years ago and morphed into the go-to analyst for all things tech real estate, continues to chronicle the former unicorn of Softbank, brokerage firm Compass.
As someone once said, Cash is King, and so is profit. I’ve long discussed their predicament, having pitched themselves to investors as tech play when they are really a traditional brokerage now forced to survive by making a profit—”disruption by capital.”
Their continuing slide, as measured by their “burn rate,” does not reflect their brokers, who power the firm. It’s all about the founder’s business model, which has never been profitable and has been forced to slash costs to extend survival. DelPrete thinks that:
Despite another quarter of high cash burn, the company appears to be positioned to achieve breakeven in 2023 after massive cuts made over the previous 12 months.
That’s good to hear for the sake of all my friends there. The gamble with those necessary cuts is whether agents will stand for the lack of the services that were the draw in the first place.
Compass revenue falls in Q4 — but losses narrow despite ‘difficult year’ [Inman]
DelPrete shared quite the chart this week about their cash flow and how they had to draw down from a line of credit.
This Week in Aspirational Pricing
This week gave us an unusually high-priced sale in Florida, giving my $50M+ chart its second entry for 2023.
-Rush Limbaugh’s Longtime Palm Beach Home Sells for $155 Million [Wall Street Journal]
-Late Rush Limbaugh’s house sells for $155 million, setting new record in Palm Beach [Palm Beach Daily News]
-Mark Wahlberg Gets $55 Million for Massive Los Angeles Mansion [Wall Street Journal]
There is another super luxury sale waiting in the wings until May. My former hometown in Connecticut will close on a once $103,000,000 contract price for $85,000,000, sold by the agent that we used for a recent home purchase and sale. We spent much time boating around that property when we lived in Darien.
-Darien finalizes Great Island purchase; price drops from $103M to $85M [Darien Times]
Sales are happening, but the U.S. superluxury market is starting off slowly in 2023.
The Office Market Is Going To See A Lot More Damage Before It Stabilizes
As I’ve mentioned, the upper end of Class A office space will likely see less damage than the remainder. This chart supports that idea from the Axios piece: When it comes to office buildings, it’s survival of the fanciest
In other words, there will be a continued pattern of “the best and all the rest.”
Here is the latest security card swipe data from Kastle – Remember that their charts indicate that pre-pandemic occupancy is 100% which is not what they really mean. I wish they’d fix that.
My favorite housing market/economic charts of the week made by others
NEW: An alarming number of Americans are already struggling, even if they have jobs— Heather Long (@byHeatherLong) March 8, 2023
20.5 million are behind on utility payments
Nearly 25 million people are behind on their credit card, auto loan or personal loan payments. We haven't seen that since 2009https://t.co/QDCuCy7nXe pic.twitter.com/6IgVrXoK2q
My favorite random charts of the week made by others
#DomestiquePreview by @Eritropoetina 🧵— Domestique (@Domestique___) March 9, 2023
The peloton is close to Nice but the ‘worst’ is yet to come. Stage 6 of #ParisNice is the first one of a very interesting trilogy in the Alpes-Maritimes. 197.4km and 2665 altitude meters. Sunny and very windy! ⬇️ pic.twitter.com/HphR92XpgX
The fragrance of books, decoded. pic.twitter.com/2H9ZElIex7— Brian Roemmele (@BrianRoemmele) March 9, 2023
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
Flagstar Gives $1M TO Fix Our Lack Of Diversity Problem
After years of complaining about the inability of TAF to fix the 97.7% whiteness of our industry through their lack of action and awareness of the problem, it was heartening to see this bank take action on the issue. As a reminder, TAF is the organization that wrote the bat-shit crazy letter, the chickenshit letter and is the subject of an active investigation by HUD on whether USPAP promotes a lack of diversity in the appraisal profession (BLS: 97.7% of appraisers are white). I wonder if EY is aware that one of its partners is the current Chairman of TAF’s Board of Trustees?
Here is the article I was recently cited in:
Flagstar gives $1 million to fix appraisal industry’s lack of diversity [American Banker]
OFT (One Final Thought)
Some days are an endless loop.
Brilliant Idea #1
If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:
- They’ll be open 24 hours;
- You’ll be open for 24 hours in a row;
- And I’ll be stuck in an endless loop.
Brilliant Idea #2
You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive, and it helps me craft the following week’s Housing Note.
See you next week.
Jonathan J. Miller, CRE, Member of RAC
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller
Reads, Listens and Visuals I Enjoyed
- Late Rush Limbaugh's house sells for $155 million, setting new record in Palm Beach [Palm Beach Daily News]
- What happened to Silicon Valley Bank? [Axios]
- California’s Attorney General Is Suing Huntington Beach For Blocking New Housing [Laist]
- New York, I Love You, But You’re Bringing Me Down [Bloomberg]
- Even Wealthy Landlords Are Skipping Payments on Office Buildings [Bloomberg]
- Cash Burn Continues as Compass Navigates to Breakeven [Mike DelPrete – Real Estate Tech Strategist]
- Housing crisis in Finland: A study finds unprecedented increases in housing costs across the country [Helsinki Times]
- When it comes to office buildings, it's survival of the fanciest [Axios]
- London Has Become the Land of the £1 Million Home [Wall Street Journal]
- NYC's Prohibited Buildings List banning short-term rentals goes live [Brick Underground]
- Why South Florida's Office Market Shines As Other US Regions Struggle [Commercial Observer]
- Darien finalizes Great Island purchase; price drops from $103M to $85M [Darien Times]
- Housing Market Momentum Stalls as Critical Spring Season Approaches [Wall Street Journal]
- The surprising impotence of Fed rate hikes [Axios]
- Soaring Condo Insurance in Florida Could Push Owners to Sell [The Real Deal]
- Home foreclosures are ticking back up [Axios]
- Compass revenue falls but losses narrow in 'difficult' 2022 [Inman]
My New Content, Research and Mentions
- WSJ News Exclusive | Rush Limbaugh’s Longtime Palm Beach Home Sells for $155 Million [Wall Street Journal]
- Manhattan Apartment Rents Tick Up Again As Lease Signings Surge [Bisnow]
- Gap widens between Manhattan and Brooklyn median rents as demand for luxury rentals surges [Brick Underground]
- Manhattan rents soar to February record [Business News]
- NYC Apartment Demand Surges in February [The Real Deal]
- Flagstar gives $1 million to fix appraisal industry's lack of diversity [American Banker]
- Manhattan apartment hunters see no relief from near-record rents [Crain's New York]
- New York City's Rising Rents Show No Signs of Slowing [Investopedia]
- Six NYC Market Factors to consider for Out-of-Town Owners [Real Estate Weekly]
- Manhattan Apartment Hunters See No Relief From Near-Record Rents [Bloomberg]
- Manhattan Rents Soar to February Record [Mansion Global]
- Hotel-Branded Residences Thrive During Housing Market Downturn [Wall Street Journal]
Recently Published Elliman Market Reports
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 2-2023 [Miller Samuel]
- Elliman Report: Colorado New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: California New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: Normandy Isles/Normandy Shores New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: Florida New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: New York New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 1-2023 [Miller Samuel]
- Elliman Report: Hamptons/North Fork Decade 2013-2022 [Miller Samuel]
- Elliman Report: Long Island Decade 2013-2022 [Miller Samuel]
- Elliman Report: Manhattan Townhouse 2013-2022 [Miller Samuel]
Real Estate Blockchain
- ‘We’re not ready’: NY, NJ still building for extreme weather 10 years after Hurricane Sandy [Politico]
- Hurricane Sandy Devastated Coney Island 10 Years Ago. So Why Has NYC Added Almost 2,000 Homes to the Area Since? [The City]
Appraisal Related Reads
- A spring bump in the housing market [Sacramento Appraisal Blog]
- A Black couple settles lawsuit over a home valuation that rose when a white friend posed as the owner [LA Times]
- Black couple settles lawsuit claiming their home appraisal was lowballed due to bias [NPR]
- Black couple settles bias suit over lowballed home appraisal [Courthouse News]
- FLAGSTAR BANK, N.A. PROVIDES $1 MILLION TO ADVANCE APPRAISER DIVERSITY [PRN Newswire]
- Fannie Mae: Appraisals are no longer the default option [Housingwire]
- The effort to diversify the field of home appraisal [NPR]
- Prices went up & worst volume ever – Sacramento Appraisal Blog [Real Estate Appraiser]
- Ban Multiple Regression? – George Dell, SRA, MAI, ASA, CRE [George Dell]
Extra Curricular Reads
- Murrow-McCarthy, 65 years on: Tenacious media myth and a telling reminder [Media Myth Alert]
- The Hummer EV Is Huge, Heavy, Ostentatious, and a Lot of Fun [Road & Track]
- The Bathrooms of Old New York [New Yorker]
- Do You Speak New York Times? [New Yorker]
- Inside the Suspicion Machine [Wired]
- How a single engineer brought down Twitter [The Verge]
- Six former Phillies died from the same brain cancer. We tested the Vet’s turf and found dangerous chemicals. [Inquirer]
- Why Toblerone Is Dropping a Famous Swiss Mountain From Its Packaging [NY Times]