Macro-Markets (The Rental Market)

in Manhattan (and Brooklyn)

The Manhattan real estate market is one of the most competitive, dynamic markets in the world, and last month underscored that fact. With 1,911 apartments coming on the market and close to 1,200 going into contract, Manhattan once again defied macroeconomic conditions and marched to its own drum. That said, there were a few bumps in the road last month. Specifically, there was a one-week period when new listings and apartments going under contract both dropped by approximately 50%, according to UrbanDigs.com. However, the Manhattan market recovered significantly the following week with double-digit gains in both categories. Whew! But what’s the outlook for May?

With the Fed meeting this week, both Reuters and Forbes predict a 0.25% jump in interest rates but expect this to be the final one of the year. Short term, this might give buyers the jitters at the beginning of the month. However, many think those buyers will settle into the new normal of 5% to 6% interest rates — just like they did towards the end of 2022. If those predictions hold, homebuyers will feel more determined and focused on purchasing Manhattan and Brooklyn real estate, especially as the year progresses. So, May could start slow, but the combination of a tight rental market with expected rent price increases and buyers settling for the new interest rates, buyers could come screaming back into the sales market by mid-to-late May.

And with that, the rental sector becomes the one market within the entire New York City real estate landscape that can be the savior and difference maker, even while there’s so much uncertainty on the global stage. Because our city is so transient, people come and go at all times of the year, particularly during spring. If the rental market is too hot, renters become buyers. We’ve already seen some of that, but some are predicting even more buyers will emerge from the rental market, as rental prices are on pace to get hotter — just like the weather — putting pressure on the sales market, in a good way!

As we all know, macroeconomic conditions can impact real estate markets. Manhattan can be particularly vulnerable to downturns on Wall Street. So then, if the rental market can be considered the savior, Wall Street can be viewed as the kryptonite for Manhattan, and even Brooklyn. That said, Manhattan and Brooklyn can also act very independently, particularly in response to national economic concerns. Even though New York City is thought of as very international, the real estate market here tends to react uniquely compared to most national and global geopolitical events and issues that can wreak havoc in other locales. New York City has already been weathering bank closures and mass layoffs all spring long. I expect it to endure future storms as we stay on course for a healthy spring – all things considered.