America's most expensive 2006 rentals

By Lacey Rose

updated 8:01 a.m. ET Aug. 17, 2006

If you're hesitant to jump into the housing market, you're not alone.

As the real estate market shows signs of softening, many Americans are adopting a wait-and-see attitude about home buying. And those in need of housing are turning to the only viable alternative — rentals.

The result of this shift is an increasingly tight rental market.

According to the latest Commercial Real Estate Outlook from the National Association of Realtors, a trade association based in Washington, D.C., the apartment rental market will see average vacancy rates of 5.7 percent in the fourth quarter of this year, down from 6.2 percent during the same period in 2005.

"With mortgages rising and home prices at such a high level, people who might have considered purchasing a home a few years ago may now be turning to the rental market, particularly in big cities like New York," says Richard Levy, a senior research analyst at the National Multi Housing Council, an industry association based in Washington, D.C.

But much to renters' chagrin — and landlords' delight — greater demand has led to higher rents. In fact, NAR expects rents will rise an average of 4.1 percent this year, compared to a 2.9 percent increase last year.

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To determine the costliest 20 rental markets in the U.S., we turned to real estate research firm Global Real Analytics, which publishes the National Real Estate Index. The San Francisco-based company collects rental data for studios through three-bedroom units in apartment complexes around the country. The firm provided its most recent data on the metropolitan areas with the highest annual rents per square foot.

As in 2005 (see "Most Expensive Rental Markets In America 2005"), the New York metropolitan area, which includes New York City and its surrounding counties, topped our list, with an average price of more than $27 per square foot for a high-end apartment.

In Manhattan specifically, the average rent came in at a whopping $48.33 per square foot — an estimate supported by July figures from Citi Habitats, a New York City-area real estate agency. The median monthly rent for a studio apartment in Manhattan is more than $1,900, according to Citi Habitats. If it's a three-bedroom spread that you're after, prepare to fork over somewhere in the neighborhood of $5,000.

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