Kael Goodman (Marketproof) and Jonathan Miller (Miller Samuel) discuss Jonathan’s NYC rental market reports, including how they are made and distributed and what they are telling us about the ever-tight and expensive NYC rental market.
0:00 Opening discussion
0:40 Curbed conspiracy theory, The Real Deal, Inman
2:58 Information linkage and sources, losing the source
5:10 How trend reporting works
11:33 How information is distributed
16:40 How does data get from lease to report
19:00 How are actual rent numbers determined
24:00 How many rental listings are there, Elliman, Corcoran, Compass, Streeteasy
30:30 Difference between asking and actual rent doesn’t matter, small discounts
32:50 Why are people reacting to the rental numbers
35:25 Rents and affordability – Closing
This transcript has been edited for readability and clarity.
Kael Goodman (KG): Hey Jonathan, it’s great to get this time with you.
Jonathan Miller (JM): Yeah, absolutely.
KG: What I wanted to talk about today is your Manhattan Rental Report. The reason is that you published your January report, and it got picked up by the usual news channels like CNN and CNBC, the ones that generally cover your stuff.
Curbed conspiracy theory, The Real Deal, Inman
KG: And then it got also picked up by Curbed, which is also a well-known publisher. But Curbed framed their story more like a personal investigation. A totally different take than what a more traditional news outlet would’ve taken. And it was a bit of a conspiracy theory.
JM: Yeah, right? It had a lot of people scratching their heads. It was really well written. It was a good read. The writer is talented, but it seemed like it had seven or eight sections, and every section said, ‘I know this probably isn’t right, but here’s what I’m thinking.’ So the reader, in the end, is like, ‘so no one ever came back to New York.’ That was the takeaway. It was somewhat odd. And what was interesting for me was I was talking to a lot of media, and several large news organizations were looking at this article and wanted to write more about it or have articles like that on the topic of people not rushing or flooding back to the city – and yet it was based on nothing. So I was taken aback by how viral that piece actually went.
KG: It was viral enough that The Real Deal, probably the largest trade publication for the real estate community here in New York, wrote a response. Really a takedown.
JM: Yeah. Point by point. This has gotten much attention, but it isn’t right, and here’s why. Unfortunately, right at the end, they had to publish a correction for misspelling the Curbed writer’s name.
KG: I thought that might have been on purpose, actually.
JM: Oh, you think so.
KG: I’m just teasing.
KG: And then after that, Inman which is a national real estate trade publication, followed up again, responding to The Real Deal piece. They also weaved into it some of the responses that were on Twitter. And so we’ve had this ongoing media thing that emanated from your Manhattan January Rental Report.
Information linkage and sources, losing the source
KG: And what was interesting to me is the way in which information disseminates. When news sources like NY1, CNN, or CNBC referenced your report, they say, ‘as reported by.’ But then, as it emanates across the media, that original reporting goes away.
JM: Every iteration where they’re referring to the prior article, they’re not referring necessarily to the source. And the further you go away from the source, the more diluted the linkage is to where it actually came from.
KG: I’ve been using chatGPT to write blog posts. I’m like, ‘oh my, who am I plagiarizing here?
JM: Exactly. It’s just another layer away. That’s going to have to be worked out.
How trend reporting works
KG: So I wanted to take a step back and talk about how the report is actually generated. How do you do it, how is the sausage made?
JM: Besides just pressing a button, and it just pops up.
KG: Yeah, I think it’d be helpful for people to understand that. And then, secondly, how does the information get from your laptop out into the world? What is the process by which this is done?
JM: Sure. We’re in this quest for transparency, right? This is my goal with any of the reports I author for Douglas Elliman, the rental report is one of them. Also, the quarterly sales reports. I have the exact same methodology for all of them. In terms of how you get them out. What do you do? And some have a bigger following than others. The rental report in New York City is very popular. And so is the Manhattan Sales Report.
KG: They move the needle. They move the market.
JM: Yeah. Yeah. And so the responsibility is to ensure you’re conveying the information in the right context. And so, just one thing, and this is something that was in the rental report, is I’ve noticed over the last year that we have that the national real estate coverage has been far more negative. Not that I’m trying to be positive, but far more negative than I think what’s happening on the ground. And so the reason for that is, and this is maybe more about the sales market, but how do I think about this, that the year-over-year look is wildly distorted. I’ve seen your charts, comparing 2022 to 2021 and 2019 and 2018, and I have similar charts. 2021 was a rocket ship, but in 2022, everybody’s doing year-over-year comparisons to 2021. So, of course, sales activity fell x percent, and leasing activity fell x percent and double-digit and huge numbers.
Yet, I’ve been espousing forever that year over year is the way you control for seasonality, right? And so it’s not that it’s not credible, I’m not a robot. Like we’re looking at this and saying, Hey, this is like wrong. This is a mischaracterization. So anyway, that’s just to lay the background, the way I think about it.
Rental data is not public record. Through my affiliation for three decades with Douglas Elliman, 1994 is when I first started working on this, and from the Real Estate Board of New York, we get the rental data. Other sources come into those sources. When doing the stuff for Marketproof, you’re trying to show a definitive count of how many new construction contracts are signed. I’m trying to build the right trend, the housing trend. So, for example, the rental report or a sales report, January ends, but the data flow from January doesn’t end on January 31st, right? There’s data you could trip into a month or two months later, but I won’t wait three months to publish a January rental report.
It’s very robotic, like where you, you do things the same way for, we publish in 40 different markets, US housing markets in the US, the reports are used by the Fed and all kinds of alphabet soup of Washington, DC… HUD, FHA … organizations like that. And they use it because we have a rock-solid, consistent methodology, which is, collect the data, clean the data, there’s a lot of garbage rentals for 10 cents and, stuff like that. And then we have a model that we built that pushes the data through and sorts and slices and dices it so we can break things out by bedrooms and by quintiles and whatever. We run it through, and we have a lot of expertise with that because we do so many different markets. And inevitably, every month or every quarter, there’s a data problem you have to figure out, so it’s not an audit, fully automated.
KG: So the data is hand reviewed. Anomalies are cleaned or corrected, or discarded.
JM: Yes. As best we can. We’re going through it, and maybe my tragic flock for somebody doing this is that I insist on doing a lot of that myself because that makes me able to talk about the market in more color than just looking at the results and saying, ‘Hey, it’s up 13%, or It’s down 12%.’
KG: You’re not just a guy on tv. You are really doing the work.
JM: It’s the idea of enriching the story to make it so that it is relatable and understandable. So we crunch the numbers, and I write my analysis. When I first started doing market studies in the early or mid-nineties, back when the only way publications would write about your report is if you gave them an exclusive, like whatever publication, like they weren’t interested in this unless they were the only one. And I said I can’t do that because then we’re not neutral. So, I wanted it to be easily disseminated.
KG: So you maintain a relationship directly with reporters?
KG: You don’t have handlers?
JM: No. And part of the way to think about it is that we’re trying to put things out at the same moment in time. So that everybody has a fair shot at covering it. If they’re interested, they cover it, and they don’t have time leverage over someone else, which brings in another problem where and this is something I noticed right in the beginning that print media is a day behind online or blogging.
But just, at a bare minimum, if a print outlet talks to you today, they can’t publish it in the paper until tomorrow. But if you’re talking to a news wire or somebody else, they don’t have that same sort of mechanical restriction. So I created an embargo system.
KG: So you write your report, you have a distribution list of reporters on that list.
KG: You click send.
JM: Not quite yet. So, to build that list, their outlet has to agree to the embargo concept. And listen, no one’s perfect. I’ve probably had half a dozen violations. And they fix it. But it’s always a communication disconnect. No one has ever been completely like, Hey, I don’t care about what’s right and wrong, we’re gonna get the scoop or whatever. There’s never been any of that stuff. Everything has been very high level in terms of trust and integrity.
But probably half a dozen times, outlets have made a mistake, and when I reach out to them, it’s fixed, immediately, taken down. Or if they can’t take it down, we have a meeting to discuss how this can’t happen again, and then it never happens again. The reason why I’m spending time on this is that that’s really important to me.
KG: I think people need to understand the way you’re doing it is not how it’s typically done.
JM: All I care about is everybody gets it at the same time, print and online. And then, I have I make a list. I actually work a lot with Elements PR people, too, because the reports are all done in their name. So reporters will reach out to them and say, ‘Hey, can you add me to your distribution list?’ And they’ll explain what the embargo concept is. And then, I maintain a list, and I maintain which geographic location, and when people ask to take it off, we take it off. They’ve switched beats, and they don’t need the email anymore or whatever. And so it’s this living, breathing thing. I learned this from a pr friend of mine who ended up moving to Australia like 20 years ago, but I’m still using the spreadsheet that he built for me to maintain this.
KG: So you are acting as your own PR firm?
JM: Yes. I don’t have any pr.
KG: And so this reporter from Curbed could be on your list?
JM: Yes. I honestly don’t know if they are or not. But I don’t think we were in that one. We’re just in The Real Deal one. They didn’t include me for whatever, and I don’t remember the name.
KG: So there’s a very transparent way in which you dis disseminate the reports.
JM: Yes. The morning of the embargo day, so typically, the way it works. Typically, the reports are generally published on a Thursday.
Douglas Elliman publishes the reports on a Thursday. The press day is the day before, giving everybody the same opportunity. And then, some firms will release it at 12:01 on Thursday. Some will release it in the morning. They all have their own strategies. Some won’t release it until the afternoon.
KG: All right. So zooming in on this rental thing, these rental prices struck a cord because of this increase in the rental prices. I just want to step back and get into that for a second. How does the data get from a leasing room or table or countertop where a lease is signed to whatever channels it’s going through to get into your spreadsheet?
How information is distributed
KG: Because here in New York, the rental asking prices are pretty well known, but what stuff is leased for is not very well known. One of the things that you talk about is the discount between the asking rent and the signed rent. Walk me through how that happens. How do you get from the signing table to report?
JM: With our affiliation with firms, we get the closed rental prices. For the data that we don’t get, which is a smaller part of the overall data, we take the relationship between ask and actual and apply that to the ones that were leased, but we don’t have the hard number. So it’s probably a 70 / 30 split, where 70 we have and 30 we don’t. It could be less, sometimes more. And so some of the data is estimated. However, In the last five years, there’s hardly any difference between the actual and asking. And in fact, in the last couple of years, it’s been like 20% of the listings are actually bidding wars.
KG: Very important point.
JM: They’re leasing higher than the landlord is asking because there’s a supply problem.
KG: You bring up a really important point, which is that negotiability is really low.
JM: Yeah, very low. And back to my philosophy versus what you are attempting to do with Marketproof. I’m trying to show the trend. We can assume things and apply what we learned from a whole bunch of closings to what we don’t know. Because if we do it the exact same way every month for 15 years or 20 years – I have rental data going back to the early nineties – then we build a proper trend. That’s the philosophy.
How are actual rent numbers determined
KG: This is a really important point because before we jumped on this call, I went over to Streeteasy, and I checked their asking rent trend. I looked at their trend, and their number is close to yours. So in your report and the thing that kind of lit everybody up, I’ll just share my screen here for a second. Was this number right here: $4,097. And Streeteasy’s price is pretty close to that. But on the asking rent, not what it actually rented for. So it just passes the obvious test that these things are pretty close to each other.
JM: Yeah, sure.
KG: But they don’t publish, or maybe they don’t know, what stuff actually rented for?
JM: Yeah. In many ways, I know this sounds, cavalier, but it doesn’t really matter that much because this market is so tight. So if it’s $20 off, does that really matter in building a trend when you do it the same way all the time, or it’s $3 off? It’s funny that the rental price you pointed out, the $4,097, the second highest, is like a dollar more. And the all-time record is $50 more. It’s very tight because you have a market with a very low vacancy.
KG: All right, so let’s dig in just a little bit into that for a second. The number of leases that are actually paying these numbers is actually quite small as a percentage of the total.
JM: Of total apartments in Manhattan? Yeah, of course. About 75% of the rental apartments have statutory tenants in Manhattan. So we’re just looking at what we believe to be in a universe that are not rent-stabilized.
KG: Even for market-rate rentals, it’s still a small number.
JM: Absolutely. Because it’s not public record, and the reason that it’s small relative to the total is that you can only see in Manhattan about a third of rental activity on a good day. And the reason for that is that the rental market is split out by new leases, which are what we cover, all market reports cover that across the United States, and renewasl. And renewals are the secret sauce that landlords manage their businesses with. And they do not share that data. That is their proprietary reason for being. And yet it’s two-thirds of the market, at least in Manhattan and many other rental markets I’m familiar with. So it’s the majority of rentals or renewals.
KG: And your point is there’s no visibility into the renewals.
JM: None. Unless you are a landlord and you can see your own buildings. And that’s not shared. You can’t even extract it out of a public filing or anything. It’s all lumped together. It’s not for sharing. So in the rental market, what we’re trying to understand is, at least on the new leasing, the new lease doesn’t mean new construction, it means you have a different party come into an apartment, and they sign a lease. That’s what we’re looking at. And so we’re tracking new leasing data, which is again like we’re taking percentages of percentages and trying to build a trend.
KG: Okay. So I think these are really important points that I’m not sure are well understood.
JM: Yeah. Yeah, it could be.
KG: So it’s a big number, but a small portion of what’s out there. Even a small portion of market rate.
JM: Yeah, I wouldn’t say it’s small, so it’s a small of the total turnover, but it, it’s plenty large enough to indicate a trend.
KG: that’s a few hundred million dollars a month.
JM: Yeah. But, you know, sooner or later, that’s real money. But that’s not what this is designed to do. You are thinking in the context of having absolute accountability for all the transactions, that’s how you’re thinking about it, and it can’t be done. Like it, it is impossible. It doesn’t matter whether we’re in San Francisco or Seattle or Manhattan or Brooklyn, or Queens. That’s the way the rental market operates. It’s so much different than the purchase market.
How many rental listings are there, Elliman, Corcoran, Compass, Streeteasy
KG: Okay, so let me take another angle on this. I just looked at how many rental listings there are today across a few different websites. I looked at Elliman, and there were 5,548, Corcoran, there were 5,120, Compass 5,917, and Street Easy, 6,434. What’s going on there? Why so much variation?
JM: So, Streeteasy is the outlier because they count inventory differently than everybody else does. Streeteasy counts it as if in that month, that listing could have been an active listing, for an hour or most of the month, it’s counted, so it can be higher. Whereas the way we do it and the way everybody else does it is, they basically look at what the total was at the end of the month. How many there were, and that’s the number for the month of, say, January. It’s not that something on January 3rd popped in and was active for a day or two. It’s really looking at the end of the point, and then you measure every end period, and that’s how you build your trend. There’s no other way. In fact, people don’t generally realize, in any market study that is done, the hardest historical by far is to build inventory trends because you can’t go back in time. Because the status of that record, whatever system you’re using, has pivoted from something that’s available to something that’s leased or taken off the market.
KG: Yes, as a software company, we have tried to do those things. It’s really it’s a pretty high hurdle.
JM: It’s very difficult.
KG: Yeah. All right. So I just actually learned something that I did not know. And I think most people don’t know. Part of my perception, which I am gonna have to go back and rethink, is that many rental listings are only posted on Streeteasy and nowhere else. But what you’re saying means that isn’t the only reason why the Streeteasy number is so much higher.
JM: The methodology is different. They get a lot more li like they got a lot more inventory during the pandemic than everybody else did because their methodology is different. And I’m not criticizing it, it’s just different. Yeah. Like it’s a different way to look at it.
KG: I’m in the business, and I didn’t know that until right now. So I think that’s super interesting. Alright, so how, how are people that understand these things? These are very technical issues.
JM: One of the things that we do at the bottom of every report, whether it’s a rental or purchase report or a 58-page report, or a two-page report, is we have a methodology link on the bottom of the last page. It’s, maybe, not as granular as what we had the discussion of. And, but it’s an attempt to, again, provide transparency. One of the things over my career that’s really annoyed me is when you see something built with a black box. You can’t make a decision about whether it’s credible or usable. Like the Case Shiler index is a black box, besides other flaws for housing…
KG: probably for another video.
JM: …Yeah. That’s, that, that’s a five-hour one. But anyway, I think the point is to provide as much clarity as you can. I get lots of questions about and feedback from the brokerage community about the rental market, and it really helps me think about things for the next time because when we talk about how to do a rental report, that’s not really the question. The question is, how do you put the results out there in a neutral way? That you interpret what happened. How do you do that, right? This is what the brokerage community is trying to do, they want to understand the markets. And we sit down at a Starbucks, and they talk to somebody over a cup of coffee about why this rental is a good deal or why it isn’t. They want to understand more than just, hey, this one apartment they’re looking at, they want to give context around it. And that’s hopefully what the rental reports offer.
KG: You’re an independent third party. Even though you publish through Douglas Elliman, you publish your own reports, you’re doing your own research.
JM: The great thing about Douglas Elliman, as I said earlier, I’ve been doing them since 94. And the number one rule for me was they never apply any influence or pressure. The only thing they have control over is the graphics. The report has their name on it. And they’ve always been honorable about that because they recognize that their clients want neutral information about what’s going on.
So in a good market, I’m a good guy in a bad market, I’m the bad guy. And I don’t care. What is the state of what’s happening right now?
How are actual rent numbers determined
KG: So I, and I just wanna circle back to one thing. I get asked a lot if I have rental information about what things actually lease for. And what you’re telling me is in the macro, it doesn’t really matter.
JM: It doesn’t. It doesn’t. Everybody’s looking at market reports the wrong way. And one of the things we say in the footer of the report is it’s like a trend. You know the word trend.
And I had this, I remember I was taking an appraisal class in the early nineties, and the professor said, ‘the trend is your friend. Until it ends’. That’s the goal. And so when you look at every, all the data that you’re collecting, and the goal is the trend. Not a repository of every single transaction, which is like counting grains of sand, really, because when you think about it, even in the sales, you can’t get every sale in a period unless maybe you wait ten years because there could be a piece of litigation where the transaction hasn’t been recorded yet, and you don’t know about it. And we’ve had plenty of that type of situation. Everybody has this sort of absolute absolutism about public record. And public record is, you know better than me. It’s super dirty, right?
KG: Deeply flawed.
JM: It’s deeply flawed. And there’s yet there’s this sort of like aspiration, like it, it counts for everything. And to me, yeah, I focus on the trend.
KG: And just to make a little joke out of what you’re saying. In our software, we have Wells Fargo, and we have Wells Frago. You can’t imagine how many mortgages are recorded saying Wells Frago.
JM: Amazing. Amazing. Yeah. Is that reviewed? No.
KG: Yeah. All right, so I, I think this is important stuff. We’re getting a little long here, but let’s do one more quick thing.
JM: I have a five-hour limit on this kinda stuff, so you’re fine.
How are actual rent numbers determined
KG: Let’s just about where we’re at with rents and why people are reacting the way they are. Why are people reacting to these rental numbers?
JM: So I never miss an opportunity with either my students at Columbia or media or anybody tell a dad joke with that. And the way I think of the rental market, what I was saying was the opposite of rising rents isn’t falling rents. It’s really stabilizing rents. And so we saw this big rocket ship buildup of rental prices in Manhattan in 2021. By the fall of 21, we got to parity with pre-pandemic. Even though it’s going straight up to the moon, it’s still, we were focused on getting back to where we started before the pandemic. And once we did, everything after that, 22 to now, has been like extra credit. And last summer in July for Manhattan, rents, I could see it coming. We were gonna see a peak, and I could see it coming because we’re seeing a decline in bidding wars and a decline in concessions. You could see all these other indicators suggesting price is always like the last thing.
And so you could see it was gonna happen. I thought it would happen in August, but it peaked in Manhattan in July, and then the expectation was, oh, good, rents are gonna get affordable. And I was like, what is gonna bring rents down? We have a vibrant regional economy. We have mortgage rates double now what they were a year ago. So many people were gonna buy or be pushed into the rental. Making rents at least stay the same or not decline. And my other sort of dad joke to this was I called 2023 the year of disappointment because renters and purchasers are disappointed that they’re not seeing a tremendous improvement in affordability. And then landlords and home sellers may not get the rents or the prices that they had in 2021.
Rents and affordability – Closing
JM: So I think the takeaway is that rents are moving sideways, and it’s frustrating for many because affordability is so important.
I wrote an article a decade ago for Douglas Elliman when they became a hundred years old. I remember reading New York Times articles from the early 1920s real estate archives. People were complaining about international demand, affordability, and talking about how important Wall Street was to the real estate market. If I put that article with a 2022 or 2023 headline, it wouldn’t know it was written in the early nineteen-twenties. So some things don’t seem ever to go away, and affordability challenges in New York are – I’m not downplaying it – it’s actually detrimental to New York City to have a lack of affordability so that workers can live in the city. That’s not a good thing. But on the other hand, the distance, back a hundred years, shows how wildly difficult the challenge is to create affordable housing for the city. My job with what I do is just to convey, without the reader having to make a calculation, oh, he’s conservative, or he’s optimistic. I just wanna be right in the middle and show as best I can. That’s all I can say.
KG: So you’re your kind of overarching point is this is a problem that has persisted for a long time.
JM: For sure, decades. Sure, and there’s no simple solution. The last administration in New York tried, and there’s talk about this administration. There isn’t one solution. It’s gotta be many. But that’s not what I do.
KG: You’re not a government official here.
JM: I’m not. Also, I don’t necessarily have deeply understood insights about what makes housing more affordable other than building more of it. Tax credits and all that stuff is not what I do, so I’m not an expert in that. What I think I’m an expert in is housing trends. And that’s all I care pretty much care about on the topic.
KG: So then people take the trend line and going back to what we said at the beginning of this, some people just get a report on where we’re at in the trend and what the absolute numbers are, and then other people are gonna look for explanations and react to it more emotionally.
JM: Tell the story, that’s all I care about. Enable somebody to tell the story of the market in the right context as opposed to quoting numbers up and down and sideways. What does it mean? And that’s my goal.