Fighting Headwinds
Lisa Fitzig
NYC Residential Real Estate Broker | former Wall Street Managing Director | Real Trends #58 Manhattan Agent 2024
Despite the serious headwind of much higher interest rates, Manhattan real estate prices have not been greatly hurt this year. Much like the first half of the year, the third quarter market has had a much lower level of activity than in the pandemic rebound year of 2022, with prices gradually drifting lower. The price per square foot was down about 3% to 4% this quarter compared to the prior year.
?Several factors have kept the market from suffering worse declines:
?-inventory levels have declined quite a bit. Potential sellers unhappy with market conditions or unwilling to give up low-cost mortgages have been holding back;
?-increasing insistence by most large employers on at least a partial return to the office has helped prop up demand and
?-a generally healthy stock market has been supportive, especially in the luxury market.
?Although things have not been terrible, the last quarter was disappointing. In the late winter and spring, the market tone felt better than it had late last year, somewhat to my surprise. With the bulk of the Fed's interest rate increases apparently behind us, there seemed to be some reason for optimism in the real estate market. However, the market has continued to drift lower.
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?What is concerning about the current situation is that recent adverse developments in the bond and stock market have yet to be felt in the real estate market statistics. Despite the Fed pause in September, hawkish commentary, together with some concern about the potential for resurgent inflation, have caused prices to break lower in the bond market, which has caused mortgage rates to continue to increase. For example, 7-year, 6-month adjustable-rate jumbo mortgages have risen to about 7%.
?In addition, stock prices have declined about 7% over the past couple of months. There is nothing particularly unusual about this kind of pullback, and it is probably not enough to materially affect real estate prices as long as it does not get significantly worse.
?Looking ahead to the rest of the year, it seems likely that Manhattan real estate prices will continue to drift lower. New highs in mortgage rates, together with a shakier stock market, are not the backdrop that suggests a turnaround in a market that has been weaker in recent months.
?If you would like to discuss any of this, or if there is anything I can do for you, please feel free to reach out.?You can follow me on?LinkedIn,?Facebook,?and?Instagram?for my latest thoughts on developments in the NYC real estate market.