People aren’t even renting these days

By Felix Salmon
July 10, 2009

After a decade of Manhattan apartment prices going up, it’s only reasonable to expect them to go down for a few more years at least. That’s one reason to rent rather than buy right now. Another is that renting is still substantially cheaper than buying. So the rental market should be quite hot, right? Not so much:

We just released our rental report for the second quarter and the results sounded vaguely familiar to the sales trends. Rental inventory is rising at a 28.8% clip. There was a 17.5% year over year decline in rental price per square foot and a 58.3% decline in the number of new rentals.

Part of the problem is that apartments which just can’t be sold are being rented out instead. (Think Tim Geithner.) As a result, rental inventory is rising fast, which is depressing rental prices.

But what explains the plunge in the number of rentals? It seems that in a down market, people are simply much less likely to move house than they are in an up market — and that goes for renters as well as buyers. Partly, I’m sure, the reason is the depressed job market: new jobs are a big reason for people to move. But can that explain a 60% decline in rentals even as there’s a sharp drop in sales as well?

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