With rents in Manhattan and San Francisco declining, how much will prices drop before demand increases? Perhaps 20% in Manhattan:

A big drop in rental prices appears to be luring new, younger renters back to the city, even as office workers and wealthy New Yorkers remain in the suburbs and more rural resort towns. New leases in Manhattan increased 33% in October, making it the best October in 12 years, according to a report from Douglas Elliman and Miller Samuel.

The typical rent paid for apartments including discounts, or the median net effective rent, fell 19% from a year ago to $2,868 — a record decline. Smaller apartments, which cater to younger renters, fell the most. The price of studio apartments was down 21%, and one-bedroom apartment prices dropped 19%.

“I think we’re at a tipping point where the consumer starts coming back to the city,” said Jonathan Miller, CEO of Miller Samuel. “Sellers are slowly recalibrating what the values are, and the lower pricing is beginning to bring more people in.”…

And with the average rental price for a one-bedroom apartment still over $3,200 — more than twice the national average — Manhattan is still far from affordable for many young renters. Still, experts say the October increases could begin a long, slow recovery for the nation’s largest real estate market.

Manhattan is an important real estate market. It is part of the leading city in the United States and one of the most important global cities in the world. Housing is desirable there for multiple reasons.

But, Manhattan’s prices are unusual. There is a limited amount of land. Few other places in the United States have a similar local economy and cultural scene. Prices will remain high because they have been high for a while. There is a lot of capital tied up in buildings and land.

Thus, it is hard to know what to do with an article like this in regards to housing. The suggestion is a 20% price drop may be enough to attract new renters who are interested in Manhattan and have the resources to move in. Most people, and perhaps even most residents of the New York City region, do not have the interest or the resources. At the least, this is a reminder that real estate is a very local affair.

But, at the same time, housing is a city-wide, region-wide, and a national concern. The Manhattan market has unique traits but many people face housing challenges, particularly during COVID-19. Manhattan may be a bellwether or it could be more of a curiosity of how a small slice of people think about housing. The bigger question from a story like this could be: have housing costs dropped elsewhere in the United States? Since few markets are like Manhattan, perhaps not. How does this affect people? What are the long-term housing price prospects across different kinds of markets and for more typical residents?