Manhattan Real Estate Market Remains Resilient as Market Cools

Is the Window of Opportunity Beginning to Close for Buyers?

After a hot start to 2022, with signed contracts on par with 2021, the Manhattan residential real estate market aggressively shifted mid-year. A dramatic increase in interest rates coupled with a volatile stock market, inflation and continued fears of a recession was followed by a significant fall of almost 40% in signed contracts in the 2nd half of the year. The current market continues to experience a weakness in demand, not pricing, with would-be buyers sitting on the sidelines.

In the latter part of 2022 many sellers took their listings off the market preferring to wait until market conditions strengthen. This led to a sharp decline in inventory of over 15% from the 3rd to 4th quarter. Tight inventory has kept prices holding steady, falling only about 5% from a year ago, much to the chagrin of buyers.

2023 Forecast: A precipitous fall in pricing is not expected as sellers wait out the market, patiently waiting for buyers to return. This year's market may hit its stride during the 2nd quarter as interest rates, inflation, and stock market volatility level off along with lessening fears of a recession.

As the Federal Reserve continues to signal additional, but smaller, increases in interest rates, the heavy lifting has been done with mortgage interest rates having hit their peak. Experts predict interest rates to fall to 4.5% by year-end. This is a statement I would take lightly after last year's prediction that 2022 would end the year with interest rates at 3.6-4%. However, I believe it's more than realistic for interest rates to fall to around the 5.5% range this year, driving buyers back into the market.

Buyers: Buyers continue to bide their time waiting for financial conditions to improve despite opportunities in the current market. With less competition from other buyers, sellers are more negotiable on price and terms and buyers can transact in a more leisurely manner.

Pricing negotiability for buyers began to increase in the 2nd half of last year but started trending downward in the fall. The window of opportunity may be closing for buyers who might be best served by making a purchase early this year.

Sellers: Many sellers pulled their listings off the market towards the end of 2022. Manhattan homeowners, many of whom are affluent, can afford to wait until market conditions improve for them.

Until we are in a solid seller's market, pricing along with staging are key to sellers getting the best price and a faster sale, before a listing gets stale and buyer negotiability increases. Recent data shows negotiability exceeds 10% for properties on the market over 120 days.

Rentals: While rental prices generally go down this time of year they are holding steady with prices close to record highs. Tenants can look for price pressure to ease up this year with the possibility of a slight decrease in rental prices.