Good news for New Yorkers and people who would like to be New Yorkers: Gotham’s rental real-estate boom has peaked. The evidence? The New York Times Sunday real-estate section published a breathless front-page spread proclaiming “no ceiling in sight” for rents. “All signs say landlords are likely to keep that advantage for a long time,” exults writer Vivian S. Toy.

If the Times thinks there’s no ceiling in sight, you can almost bet that the ceiling has already been reached. The paper of record has a track record on this. In 2005, the Times Sunday magazine ran a nearly 9,000-word story on the nation’s real-estate boom. The piece paraphrased—without much skepticism—developer Bob Toll’s remark that after a “painful” slowdown in some markets, “subsequent recovery would take anywhere from 3 to 10 months.” It’s now 60 months since the real-estate market crashed. No “recovery” is in sight.

Undaunted, the Times’s editors trumpeted Toy’s article with hyperbole: “Demand is so intense that there are waiting lists in some buildings, and a few landlords report that eager renters are even bidding up rents.” Toy’s article illustrates what’s wrong, still, with real-estate journalism—and with financial journalism in general.

Let’s take the “waiting list” issue first. The piece promises “waiting lists bearing the names of dozens of potential tenants,” but offers just two instances. One is Ana Morse, who needed a three-bedroom rental. Though the Times doesn’t say so, that’s an unusual request, as most New York City apartments are much smaller. Morse, as is her prerogative, made her search more difficult because she didn’t want just any three-bedroom: she wanted one in a particular building with a particular layout on a particularly high floor.

So what happened? Was Morse forced to live on the street? No. She put her name down and got the exact apartment that she wanted within months. I should be so lucky when I order trendy jeans. At the same building, Toy notes a “long waiting list of potential renters” and reports a similar phenomenon at a Brooklyn building. But the people on these lists have merely expressed an interest. Many, like Morse, “are willing to wait for a particular apartment,” as the agent of the downtown buildings says.

This kind of waiting hardly suggests a frothing market. People willing to wait for what they want show the opposite of desperation. They presumably live somewhere else now and are comfortable enough that they can be picky. In fact, discriminating customers are a real-estate agent’s worst nightmare. The industry prefers frantic potential tenants facing a nonnegotiable move-in date, preferably one less than 30 days away.

As for the bidding wars, it turns out that one woman happily let an apartment go to someone willing to pay $100 above the $2,500 listing. This example, too, shows discernment, not desperation. A desperate tenant would have kept bidding.

Toy further notes that “to compete for top rents, some landlords are undertaking expensive apartment renovations in older rental buildings. Even 10-year-old properties are being subjected to face-lifts.” That points to landlord worry, not complacency. You don’t plunk down tens of thousands of dollars in free cash flow to overhaul an apartment unless you’re nervous that newly built apartments are going to pose a threat. In a sizzling rental market, nobody insists on a washing machine or a hardwood floor.

Toy describes a luxury building with “one-bedrooms listed at more than $5,000” (italics mine). But has anyone rented a unit at that price? If so, Toy doesn’t say. She goes on to note that the same building will start offering higher-floor units “that will rent for $45,000 to $60,000 a month.” Is there any evidence that similar apartments have rented for this much? If so, Toy should present it. She argues that demand for luxury apartments “will inevitably trickle down to the lower end of the market.” Her sources: one real-estate bigwig says that for New York City, the rental lull before last year “was really a short-term blip,” and another says that because construction has slowed, “the market is going to get even tighter and prices may do even better.” Toy doesn’t present views from anyone outside the industry, who might voice some skepticism to balance out these self-serving analyses.

And Toy overlooks a lot. She never acknowledges that New York’s entry-level luxury-rental market depends heavily on Wall Street’s creation of a fresh supply of high-paying jobs. Will a 40 percent chop in Wall Street cash bonuses, as well as thousands of financial-industry job cuts, affect demand and pricing power? In a 1,600-word article, Toy cites not one dollar figure for rents that have actually been signed in the new buildings she visits. We learn about Morse and her idiosyncratic apartment tastes, but we don’t learn what she’s paying for her three-bedroom. Nor are we told what people are paying in any of the luxury buildings—not next month or next year, but right now.

Neither Toy nor the Times editors did their job here—unless their job is to sell real-estate advertising.


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