The Boerum Hill brownstone one-bedroom rental was small but nicely renovated. At the first open house, there were 15 appointments. Most of those renters made offers, some in excess of the $3,500 monthly asking price.

The Upper West Side townhouse, renovated for sale, received an offer to rent for $35,000 before the renovation was completed or had been placed on the market.

The bright and airy two-bedroom, two-bath high-rise apartment on Third Avenue was rented very soon after being listed for $11,000. There was no question of negotiating the price.

The New York City rental market has never moved quite like this before. Prices are as high as they have ever been, or higher. Options are in short supply. Hopeful tenants experience one frustration after another; the bolder ones offer more than the asking price just to get in the game. Even as many of the city’s sales submarkets have lost value since the early part of last year, the rental market throughout New York has grown tighter and more expensive. What is going on?

Historically, the sales and rental markets operated in a relatively clear relationship with one another. As the sales market broke through previous price records, more and more buyers became priced out. They would then turn to the rental market to sit it out for a few years until, they hoped, prices would normalize again. Add to those renters the recent graduates who flood into New York every summer after obtaining their first post-college jobs, and you had a fairly predictable stream of ebb and flow between sales and rentals.

Then the pandemic changed everything. Leases all over town were being broken or not renewed as so many people left town. Throughout the latter half of 2020, landlords eager to fill vacancies signed bargain-level two-year leases as workers returned. Inventory got absorbed, and then, two years later, when rental property was scarce again, landlords jacked up the rents and most of their tenants squawked, looked around at their (minimal) options, and stayed put. So inventory remained tight, and prices went up. And up.

Meanwhile, the one and two-bedroom sales markets also began to experience an inventory squeeze, and many of those units started seeing multiple bids as well. Not necessarily at historically high prices but at prices indicating a stabilized market. So buying became competitive as well, which then further solidified the ongoing interest in the rental market as an alternative. In addition, a new factor has entered our marketplace: skepticism. Ever since 1975, when the city almost defaulted on its bonds, owned real estate has increased in value. Yes, it has had some bumps, but an apartment bought for $50,000 in 1975 is worth multiple millions today. But apartments bought in 2006 and 2007 are NOT worth more today. Younger buyers don’t believe, as their parents did, that real estate necessarily makes a great investment. If a property bought 15 years ago could actually be worth LESS today, they reason, why not rent, especially now that interest rates are way up? They would rather use their capital on adventure travel.

In summary, we have a rental market at historic highs in every category and a sales market stabilizing and even turning around for less expensive properties, even as the luxury marketplace remains stagnant. So many factors contribute to today’s market reality: high interest rates, political uncertainty, reduced inventory, pricing pressures (whether up or down), and misalignment of expectations between sellers and buyers. In this environment, rental deals move at the speed of light, while every sales transaction is unique.