New York’s New Rentals: Smaller Apartments, More Perks

By MICHELLE HIGGINSJAN. 23, 2015

Developers of large rental buildings have stuck to a formula over the past several years: Keep apartments small; go big on amenities. Now, with a surge of rentals coming to market, some developers are pushing this formula to the max, tweaking apartment sizes and piling on the perks.

More than 13,000 new rental apartments are expected to open their doors in Manhattan, Brooklyn and Queens this year, according to Citi Habitats, one of the city’s largest rental brokerage firms. In Manhattan, the anticipated 4,900 apartments in 34 new rental developments represent a 25 percent increase from the 2009 peak, when 3,918 rental units opened for leasing. [NYT]

Weekly Interest Rate Overview

The Markets.   Fixed rates on home loans were down again in the past week. Freddie Mac announced that for the week ending January 22, 30-year fixed rates decreased to 3.63% from 3.66% the week before. The average for 15-year loans fell to 2.93%. Adjustables were mixed, with the average for one-year adjustables remaining at 2.37% and five-year adjustables falling to 2.83%. A year ago, 30-year fixed rates were at 4.39%, which continues to be 0.75% higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans continued to fall, albeit at a slower pace, with the 30-year fixed rate loan averaging 3.63 percent this week. Housing starts picked up in December coming in at a seasonally adjusted 1.089 million unit pace and beating market expectations. Meanwhile, the drop in energy prices pushed the Producer Price Index down 0.3 percent for December and the Consumer Price Index fell 0.4 percent.”  Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.  

Current Indices For Adjustable Rate Mortgages
Updated January 23, 2015

	Daily Value	Monthly Value
	January 22	December
6-month Treasury Security	0.08%	0.11%
1-year Treasury Security	0.17%	0.21%
3-year Treasury Security	0.90%	1.06%
5-year Treasury Security	1.39%	1.64%
10-year Treasury Security	1.90%	2.21%
12-month LIBOR		0.602% (Dec)
12-month MTA		0.121% (Dec)
11th District Cost of Funds		0.686% (Nov)
Prime Rate		3.25%

Weekly Interest Rate Overview

The Markets.   Fixed rates on home loans continued dropping in the past week and remained at lows not seen for almost two years. Freddie Mac announced that for the week ending January 15, 30-year fixed rates fell to 3.66% from 3.73% the week before. The average for 15-year loans decreased to 2.98%. Adjustables were lower as well, with the average for one-year adjustables decreasing to 2.37% and five-year adjustables easing to 2.90%. A year ago, 30-year fixed rates were at 4.41%, which is 0.75% higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans fell for the third consecutive week as oil prices plummeted and long term treasury yields continued to drop despite a strong employment report. The economy exceeded expectations by adding 252,000 jobs in December which followed an upward revision of 50,000 jobs to the prior two months. The unemployment rate fell to 5.6 percent which was the lowest since June 2008.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.  

Current Indices For Adjustable Rate Mortgages
Updated January 16, 2015

	Daily Value	Monthly Value
	January 15	December
6-month Treasury Security	0.08%	0.11%
1-year Treasury Security	0.16%	0.21%
3-year Treasury Security	0.75%	1.06%
5-year Treasury Security	1.22%	1.64%
10-year Treasury Security	1.77%	2.21%
12-month LIBOR		0.602% (Dec)
12-month MTA		0.121% (Dec)
11th District Cost of Funds		0.686% (Nov)
Prime Rate		3.25%

Q4 2014 Manhattan Rental Market Report

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December 2014 Facts:

• The average Manhattan apartment rented for $3,381 during December 2014, down $13 from the month prior.

• Rents declined slightly across the board.  Average pricing for studio, two and three bedroom homes all decreased by 2%.  One bedroom units also declined in price, but by a negligible amount.

• The Manhattan vacancy rate increased minimally – from 1.73% in November, to 1.74% in December.  However, the borough’s vacancy rate is down year-over-year.  In December 2013, the rate was 1.82%.

• During December 2014, 13% of leases signed included a landlord concession, up from 11% the month prior.

 Q4 2014 Facts:

• The Manhattan rental market softened during Q4 2014, when compared to the quarter that preceded it.

• The average Manhattan apartment rented for $3,401, down $93 from the quarter prior.

• Rents declined the most for studio units, where they fell by 3.8% on average.  Rents for one-bedroom homes declined by an average of 2.3%, while two and three-bedroom apartments both saw average rents decrease by 2.2%.

• When examining vacancy rates, we found 1.72% of apartments to be vacant during Q4 2014, up from 1.35% during Q3.

• During Q4 2014, 10% of transactions brokered by Citi Habitats included an owner-paid incentive, up from 6% during Q3.

2014 Facts :

• 2014’s overall yearly average rent of $3,438 is higher than 2013’s average rent of $3381.  In fact, 2014 marks a new high, beating the previous high (in 2012 @ $3420) by $18.

• 2014’s overall vacancy rate of 1.58% is higher than last year’s rate of 1.41%.

• When looking at concessions, 2014’s total average of 9% of leases offering an incentive is greater than 2013’s average of 7%.  However, concessions are nowhere near as prevalent as they were during the depth of the economic downturn.  Their use reached a peak in 2009, when a full 52% of leases included a move-in incentive.

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Additional Media & Reports

New York Luxury Towers Draw Renters to the Outer Boroughs                 Bloomberg – 1/15/2015
Featuring Citi Habitats president Gary Malin and our market research.

Median rents keep rising – but average rents drop                                       The Real Deal – 1/15/2015
Featuring our market research.

Weekly Interest Rate Overview

The Markets. Fixed rates on home loans fell sharply in the past week to their lowest levels since May of last year, in response to the markets — especially the continued drop in oil prices. Freddie Mac announced that for the week ending January 8, 30-year fixed rates decreased to 3.73% from 3.88% the week before. The average for 15-year loans fell to 3.05%. Adjustables were down slightly, with the average for one-year adjustables decreasing one tick to 2.39% and five-year adjustables down to 2.98%. A year ago, 30-year fixed rates were at 4.51%, which is over 0.75% higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans fell to begin the year as 10-year Treasury yields slid beneath 2.0% for the first time in three months. Meanwhile, the Fed minutes indicated ongoing discussion regarding the timing of the first rate hike. Of the few economic releases this week, ADP Research Institute reports the private sector added an estimated 241,000 jobs in December, which exceeded market expectations and followed an upward revision of 19,000 jobs in November.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated January 9, 2014

	Daily Value	Monthly Value
	January 8	December
6-month Treasury Security	0.08%	0.11%
1-year Treasury Security	0.23%	0.21%
3-year Treasury Security	1.00%	1.06%
5-year Treasury Security	1.50%	1.64%
10-year Treasury Security	2.03%	2.21%
12-month LIBOR		0.602% (Dec)
12-month MTA		0.121% (Dec)
11th District Cost of Funds		0.686% (Nov)
Prime Rate		3.25%

Q’4 2014 Manhattan Sales Market Report

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Trends from last quarter:

• Fourth Quarter Contracts Signed at Record High
  Contracts signed were up 10% versus last quarter and 3% versus last year.  Total contracts signed were 3,216, the highest number for the Fourth Quarter since 2006.  58% of signed contracts were co-ops—affordable available condo listings remain few and far between.
• Price Per Square Foot Sees 11th Consecutive Quarter of Growth
  Bolstered by high-end sales, the average price per square foot increased 6% annually to $1,303 market-wide.
• Inventory Continues to Grow, Remains Skewed Toward High End
  Growth in inventory continues, up 20% compared to last year.  Growth is due to condos, as co-op listings have not seen year-over-year increases since Second Quarter 2011.  Current listings are disproportionately high-end residences—properties above $2M represented 41% of available listings.

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