Manhattan Real Estate Activity Continues to Slow
Lisa Fitzig
NYC Residential Real Estate Broker | former Wall Street Managing Director | Real Trends #58 Manhattan Agent 2024
In last quarter's letter I noted that the market had slowed and predicted that reported prices were going to decline in the 4th quarter. The prediction was accurate as resale coop and condo prices declined in the range of 2-4% from the third quarter.
?These declines are really quite modest, however, especially in light of the well-known woes facing the real estate market and the local economy: higher interest rates, declining stock prices, a disappointing Wall Street bonus season, continued Fed tightening and recession fears. In fact, when I dig into the numbers, these declines are even more modest than they seem at first glance, as prices per square foot have not declined at all. There are just smaller apartments being sold.
?Reported prices haven't moved much, but I should point out that prices are reported with a lag. Prices aren't disclosed until deals close, which is typically a process that takes at least two or three months from contract signing. The most recent data we have is the number of contract signings, which continues to show a very sharp decline.
?Resale contract signings declined about 32% between the third and fourth quarters. These declines come from a very elevated level of activity in 2021, but this kind of sharp slowdown certainly isn't a healthy sign for the market. My expectation remains that prices will decline in the first part of the year.
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Anecdotally, what I am seeing is that buyers are out there but they are very price sensitive and can afford to be picky. Sellers who are determined to get last year's prices will likely find their properties languishing. We are already seeing some of this as days on the market increased sharply from the third to the fourth quarter. Yes, this is a buyer's market. Sellers need to be careful that they don't end up chasing the market down, cutting their asking price but never quite enough to find a buyer as prices weaken. This is a scenario I have witnessed in previous episodes of market weakness.
?The dynamics of the new construction market are a little different from resale properties. Levels of activity in new construction have held up much better than in the resale market-down only 2% quarter over quarter. Prices have declined only modestly there as well, but by a little more than resale prices. Developers may be more realistic about current market conditions than individual sellers.
?In summary, the Manhattan real estate market has slowed pretty dramatically and prices have started to decline and are likely to continue to do so. As things stand, I don't expect a very sharp decline, but if we get another significant downturn in the stock market, which my stock trader husband tells me to expect, then the decline would be much more significant.