From the NY Times:
GARY L. MALIN, the president of Citi Habitats, the city’s largest rental brokerage firm, has seen the real estate market at its giddiest heights and its deepest despair. There should be little that surprises him.
But when Mr. Malin’s company was preparing its latest analysis of the rental market, he was taken aback.
In March, the firm found, the average rent in Manhattan — now $3,418 a month — surpassed the all-time high set in the real estate frenzy of 2007.
“Right now, landlords can go for pie in the sky — why not?” he said. “But when are people going to say enough is enough and look at other options?”
The last time rents shot up in a similar fashion, they were tied to a strong economy, low unemployment and booming business on Wall Street.
But this spring, Manhattan rental prices seem to be divorced from the larger economic picture. While the city has added jobs in recent months and growth in businesses like technology has helped make up for losses in the financial sector, much of country is still struggling.
That disconnect has only increased resentment levels among many tenants, already reeling from a year or more of rent increases.
There is evidence that rising rents are driving perspective renters into the sales market. But for those who find buying a home in New York City is not an option — whether because of bad credit, tougher lending standards or lack of a down payment — the choices are limited and often unappealing.
The uncoupling of the national economy from New York rents is not typical, said Jonathan J. Miller, the president of the appraisal firm Miller Samuel. “When you see rents rising, it is usually reflective of a strong economy,” he said. “That is not the case now.”
Instead, he said, prices are being driven up by a tight credit market that forces people to stay in the rental market and limits new construction.
Some renters feeling the squeeze have resigned themselves to paying more for less.
Rental averages are up in every category, with one-bedrooms rising the most, by 6.5 percent over the past year, to $2,747, according to the Citi Habitats report. Studios rose 3.6 percent, to $1,953; two-bedrooms climbed by 6.1 percent, to $3,865; and three-bedrooms rose 4 percent, to $5,107.