To Rent or to Buy - the Age Old Question

An interesting article from the NY Times about the current New York rental and purchase markets.

When the real estate market was booming in 2007, renters showed up at apartments with checkbook in hand, ready to do battle with anyone else who might want the same place. That changed, of course, when the financial crisis hit in 2008. And the heady days that followed, when renters ruled in a down market, are now a fading memory.

In 2011 landlords once again got the upper hand as prices rose and vacancies dwindled. Multiple applications even made a comeback late last summer. All signs say landlords are likely to keep that advantage for a long time. In certain neighborhoods, rents are setting new records, exceeding the heights of 2007. Some landlords say that in extreme cases, eager renters have even bid up rents.

The demand in some buildings has become so intense that there are waiting lists bearing the names of dozens of potential tenants. This was unheard of during the downturn.

With fewer new buildings scheduled to open this year, inventory for luxury rentals will remain tight, helping to keep prices up at the high end. This pressure will inevitably trickle down to the lower end of the market.

Rental brokers said that rental prices had been buoyed in part by tighter mortgage lending, which has discouraged many potential first-time buyers from entering the sales market.

Rents in traditionally coveted neighborhoods like the West Village and Chelsea have hit new heights. But records are also being set in areas that are not as well traveled, including the financial district and Midtown West, where new rental towers have helped pull up average prices.

According to Citi Habitats data, the city’s priciest studios can be found in Chelsea, where the average rent is $2,332 a month; and the West Village claims the most expensive one-bedrooms, $3,278 a month.

But the financial district is not far behind, getting record rents for its one-bedrooms, at an average of $3,255 a month, and its two-bedrooms, at $4,575 a month.

Fewer new apartments are coming to market this year than in years past, largely because construction financing has been tight and the number of building permits issued by the city fell drastically after 2008. Citi Habitats Marketing Group estimates that there are only about 2,200 new rentals in Manhattan this year, down from more than 3,600 in 2011.

Many projects, including some rentals initially designed to be condos, will finally be finished in 2013 or 2014.

The purchase market is getting tighter as well. It seems that a lot of pent up demand from the financial crisis is driving both the rental and purchase markets.