Fears of a frozen market in which buyers and sellers stay out of the market due to economic and rate fears were sparked by a 29% fall in Manhattan apartment sales in the fourth quarter.
The number of sales in the quarter was down from last year. It was the biggest decline since the third quarter of 2020.
The median price fell for the first time in over a year.
The end of the roaring comeback in Manhattan real estate after the worst days of the Pandemic raises fears of continued weakness into the new year. The market is likely to be affected by rising interest rates, a weak economy and a falling stock market this year.
Analysts worry about a long standoff between buyers and sellers, with sellers unwilling to list amidst falling prices and buyers pausing their searches until prices get better.
Jonathan Miller, CEO of Miller Samuel, said that he could see the market moving sideways. It could weaken further if there is a recession.
Inventory is tight even as prices and sales go down. According to the report, there were 6,523 apartments on the market at the end of the fourth quarter, up 5% from last year but still below the historical average. Analysts say prices are not likely to fall enough to lure back buyers who are waiting for discounts. The discount from initial list price to sales price was up from the third quarter.
In the fourth quarter, all-cash deals accounted for over half of all sales, the highest on record.
The high-end and luxury segment is still the best. The median sale price for luxury apartments went up 4% in the fourth quarter compared to a decline in the Manhattan market. The median price for a luxury apartment is twice the increase as the market.
There are a lot of deals in the works or recently signed. The number of contracts signed in the fourth quarter was lower than last year. According to a report from Serhant, the quarter was the worst for new contracts in the past ten years.
According to Brown Harris Stevens, contracts signed are a timelier indicator of demand and one of the slower finishes to any year since 2008.
Many are predicting an upside surprise in 2023 as rates stay stable and buyers find opportunities in a softer market, according to brokers. December was a great month with a lot of year-end deals.
He said it caught them off guard. In December, things turned around.
One buyer paid 20 million dollars for a house that wasn't on the market. He said a real estate investor made offers for four separate apartments in new developments.
A wide divide between buyers and sellers in August and September caused the market to weaken. I am seeing buyers accept interest rates as the new normal and feel more comfortable purchasing, or at least that prices aren't falling
The December burst of activity was caused by foreign buyers who returned to the city in December. Buyers from the Middle East and China came back in December after travel restrictions were lifted.
Buyers are using cash to avoid higher interest rates and take advantage of lower prices, according to brokers. Prices for unsold apartments are being lowered by developers.
He said that developers are making compromises on price and closing costs. I feel good about the year to come.
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