Cover your eyes! (WalkerSister, flickr)

Watching the Manhattan rental market is like watching Saw. It's fascinating and terrible and nauseating all at the same time.

Well, get ready torture porn fans, because the second quarter market rental reports are here. Our protagonist has just stepped into a car with a stranger to find that the inside door handle has been removed from the passenger side. Let the carnage begin!

Rents are at their highest level in two years, with the median rental price shooting up 7.9 percent from the same quarter last year, according to the Prudential Douglas Elliman report prepared by Jonathan Miller. Brace yourselves: we're now at $3,125, up from $2,895 in the second quarter of 2011.

The situation is dire, yes, but not hopeless, reports Citi Habitats. Compared to the previous quarter, rents have remained relatively stable, Citi Habitats tells us, albeit at record high levels. And there's more good news (our protagonist has sent a text message to an attentive friend, who has every intention of calling the police!). The overall vacancy rate has actually gone up compared to the same quarter last year, from 0.72 percent in 2011 to 0.97 percent in 2012. Douglas Elliman reports that listing inventory rose 27.9 percent, from 4,427 available last year to 5,660 units this year.

The vacancy rate could indicate that tenants are postponing their search until after the summer "busy season," Citi Habitats notes, or "perhaps they have reached their 'pain threshold' and are looking at opportunities in the outer boroughs or in the city's sales market." The outer boroughs? Now you're really scaring us.

But what about concessions?, you may ask. You shouldn't have asked. Because when it comes to concessions, there is truly no mercy. Only 3.7 percent of rentals gave concessions (and the concessions were mostly in new buildings and they were mostly one month's free rent).

Finding a reasonably priced apartment in Manhattan may be more difficult than escaping from a killer's house of horrors, but look to the Upper East Side, recommends Douglas Elliman. Rental rates on studios there dropped an average of $40 in June. Just stay away from Chelsea, which promises certain doom: the price went up an average of $71 in June, with non-doorman two-bedrooms in the neighborhood going up $105 a month. Which is so terrifying that we need to stop writing. We can't watch any more of this.

kvelsey@observer.com

Starting at $3,340—below average!

One of the confounding things about the past three years is that while the economy has slumped and housing has been an absolute mess nationwide, in New York, we are almost back to the same levels as during the boom, especially as far as rentals are concerned. Crain's sees some softening ahead, however.

With the approach of winter and increasing jitters on Wall Street, rents are expected to be stable at best, according to Gary Malin, president of Citi Habitats, the city's largest residential rental firm.

“There are a lot of question marks in the market with Wall Street layoffs,” said Mr. Malin. “Rents won't fall off a cliff, but they will be more flexible and vacancy will creep up if negative news intensifies.” [snip]

“Little by little I am seeing concessions creep back, especially in the fringe neighborhoods,” said Gus Waite of brokerage A.C. Lawrence & Co., referring to areas like the Far West Side and the Financial District.

Landlords with empty units entering Thanksgiving and Christmas will likely reintroduce concessions to rent out apartments, according to Mr. Malin.

Layoffs would certainly have an impact, but the irony is that as long as the economy is down and mortgages are still impossible to come by, no one will be buying, and so demand for rentals will stay up, and so rents might not fall, at least not that much.

Meanwhile, nothing has been built—why do you think everyone is scrambling to get projects in the ground on the Brooklyn waterfront? So this only constrains the supply further. Will that rent tab be a Christmas present? Maybe, but there are still plenty of Scrooges out there.

mchaban [at] observer.com | @MC_NYC