Manhattan home prices recover 1:06
(CNN) --
Rents in Manhattan just hit an all-time high, for the third month in a row.
The monthly rent paid by a tenant for an apartment in Manhattan was $3,870 in April, up 39% from a year earlier, according to a report by real estate agency Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants.
Last year, the median effective net rent, that is, the amount renters pay after incentives from landlords, was $2,791.
"There was a significant acceleration in rental prices in April, jumping almost 40%," said Jonathan Miller, president and CEO of Miller Samuel.
Miller said that in the previous six months the typical year-over-year increase was around 22%.
Inventory is also at historically low levels, Miller added.
“All of the oversupply that skyrocketed in 2020 has been removed and there isn't a lot of inventory available,” she said.
But even as the market remains tight, with vacancy rates below 2% for the fifth straight month and available housing inventory down 77% from a year ago, Miller said rising demand for rentals may also be influenced by what is happening in the buying market: rising mortgage rates.
Mortgage interest rates reach their highest level since 2009
Interest rates on 30-year mortgages rose above 5% last month and are expected to continue to rise, driving many would-be homebuyers out of the market as rising monthly payments lower their purchasing power.
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"Rising mortgage interest rates have turned people looking to buy a home to the rental market, a market that is already seeing record prices and high demand," Miller said.
Owners are back in control
Gone are the days of desperate landlords offering several months of free rent or paying agent fees on behalf of tenants during the pandemic.
Now that rents are 10% above pre-pandemic levels, landlords are no longer offering these incentives, Miller said.
Only 15.7% of contracts signed in April were discounted, the lowest in seven years, according to Miller.
Instead, the number of bidding wars has increased in the last three months, driving up rents.
One in five apartments rented in April exceeded their listing price, Miller said, with a median rent increase of 11% above the initial listing price.
"Agents putting a new home on the market get 20, 50 or even more applications in the first few hours, which leads to multiple offers," said Hal Gavzie, executive director of leasing for Douglas Elliman.
"It becomes a bidding war and the owner is the boss."
While potential tenants who offer to pay higher rent can ensure they're the ones chosen to rent the apartment, Gavzie said, landlords may also be interested in signing a two-year lease or in flexibility when it comes time to move.
These four questions will help you decide whether to rent or buy a home
"It's pretty straightforward: Demand far outstrips supply," Gavzie said.
"It's not uncommon for higher rent to be paid or conditions to improve, anything that can improve the deal for the landlord."
This dynamic is not expected to change any time soon as the city heads into some of the busiest months for the rental market, between May and August.
It's during this time that many Manhattan renters who previously secured a pandemic discount may be reaching the end of their lease and facing a whole new and much more expensive reality, Gavzie said.
"Some of these tenants who got that 30% to 50% discount, what are they going to do now that the rent is 30% or 40% higher?" he said.
"Can you afford it?"
Their general experience so far is that tenants stay and pay much higher rent.
"For the most part, we see people stay because the cost of moving, coupled with limited inventory and competition, makes finding a new place too difficult," he said.
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