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NYC's Ballooning Rental Rates... When Will They Burst?

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Last week I gave you the first quarter Manhattan market report on co-op and condo sales. The rental market report has just been released. The average rental price has increased 6.0 percent from first quarter of 2011 to first quarter 2012. The rental price-per-square-foot has gone from $49.09 first quarter 2011 to $52.57 first quarter 2012. The number of rentals in the first quarter 2011 6,665 versus 7,621 in the first quarter of 2012 that is a 14.3 percent increase.

Days on the market had a 2.5 percent increase in first quarter 2011, and it was 40 versus 41 for the first quarter 2012. The listing discount in the first quarter of 2011 was 2.7 percent versus a 2.2 percent in first quarter 2012. Listing inventory had a 33.4 percent increase, which is a huge number. It increased from 3,874 to 5,167 in 2012's first quarter.

It appears that everyone wants to get in on the booming rental market. But it's funny because it doesn't feel like there is a whole lot more to choose from when I have been searching for my potential renters. The rental price-per-square-foot increase is the highest it has been since the third quarter in 2008. The landlord concessions fell 11.1 percent within all new rentals from 36.8 percent over the same period last year. So, once again, don't expect too much leeway when negotiating the terms of your rental.

This brings me to my own situation. I, sold my apartment in December of 2010 and have been renting for a little over one year. I got brokered one month's free rent. I am now moving out, as I have bought a place. They are raising the rent on my two-bedroom, two-bathroom penthouse with outdoor space an additional $1,000 per month and it only took them two weeks to re-rent this apartment -- pretty impressive isn't it? Okay, back to the last bit of statistics. New rentals of studios increased 16.1 percent, one-bedrooms increased 13.5 percent, two-bedrooms increased 14.5 percent and three-bedrooms increased 20.7 percent. The four-bedroom rental market decreased 21 percent over the same period. My two-bedroom rental increased 14.3 percent true to these statistics. The facts don't lie.

So, the big question is, where is the tipping point? At what point will renters become fed up with astronomically rising rents? Well, we are still five percent below the record rents of 2006 (4th quarter), and credit restrictions remain tight. Despite ridiculously low interest rates, it appears that consumers are still afraid they may not qualify for a mortgage. Certainly, some savvy renters are getting the message: studios and one-bedrooms were 56 percent of sales last quarter. Don't assume you won't qualify!

If you're not sure where you fit in ... talk to the experts, leave a question in the comments, I'll be more than happy to help.

For a complete look at Douglas Elliman's 2012 First Quarter Manhattan Rental Market Report, click here.