Here’s yet another angle on why Home prices haven’t bottomed yet: Falling Rents. Rental units are competition for home purchases, especially at the all important entry level.
The Sunday NYT notes that some rentals are being negotiated 20% lower than asking price:
“Although it is notoriously difficult to quantify the state of the rental market, rents fell in almost every sector of the Manhattan market last year, according to the Real Estate Group, a New York brokerage. The steepest drop was in one-bedrooms, down 5.7 percent in buildings with doormen and 6.53 percent in buildings without. The only category that rose: rents for two-bedroom apartments in doorman buildings, up just a bit, by 0.61 percent. But these numbers, like most available data, represent asking rents rather than the final price. Anecdotal evidence suggests that some people are negotiating rents as much as 20 percent lower than the original prices asked by landlords. These figures also leave out incentives, like a month of free rent or a landlord’s paying the broker fee, which can add up to real savings.
Fritz Frigan, executive director of sales and leasing at Halstead Property estimates that when these incentives are considered, rents are actually down some 10 percent to 15 percent since the market peak in mid-2007.
“In that really strong market,” Mr. Frigan said, “landlords didn’t have to do anything.” In 2008, that was no longer the case.
In January 2008, Halstead had about 90 listings for which the owner offered to pay the broker’s fee. By the summer, that number had pushed upward, hitting about 450 a month.
“Then, in September or October, the whole thing broke loose,” Mr. Frigan said.
In a one-month period, from Dec. 23, 2008, to Jan. 23, 2009, some 1,700 of Halstead’s 9,000 total rental listings included owner payment of the broker’s fee.”
That’s Manhattan, which is greatly impacted by Wall Street. The IBO of New York City expects to see job losses of 243,000 jobs from the peak of early 2008.
How are rents doing in the rest of the country . . . ?
A Month Free? Rents Are Falling Fast
ELIZABETH A. HARRIS
NYT, January 30, 2009