October 2023 Market Update

Despite a war in the Middle East and Eastern Europe driving up oil prices, the highest interest rates in nearly 20 years, and a country politically divided with the highest debt-to-GDP ratio ever, Manhattan has maintained its status as a coveted, global city in the third quarter of 2023. There were 2,788 closed sales, an 11.3% increase from last quarter, but a 23.9% decline from the elevated activity in Q3 2022. Looking historically, this quarter mirrors 2016-2019. Economic conditions have pushed buyers and sellers to adjust and align with overall market expectations, though somewhat reluctantly.

We are entering a buyer’s market. That being said, the ongoing inventory shortage across Manhattan is an obvious hurdle on the surface, but the conditions producing this situation are important to understand the big picture. Would-be sellers who bought from 2020-2022 picked up an all-time- low interest rate, which for many, heavily weighs their purchase as an investment, traditionally a secondary factor for the typical buyer. With rates now significantly higher, many are adopting a "wait and see" approach instead of listing, leading to inventory that is more expensive than usual, but not necessarily deserving of that price. Because of this, time on market has climbed, and sellers are starting to adjust prices more willingly.

Interest Rates Moving into the final quarter of the year, interest rates will be what dictates future performance of the overall real estate market. If they continue to climb, many buyers in the middle segment of the market will forego purchasing, while declining rates will spur activity. Steady rates, while high, will allow both sides to acclimate to economic conditions and evaluate if a purchase or sale makes sense. Many of the buyers today are cash but the few that are financing are telling us that they see a 30-year mortgage as one of the best investment instruments in the world, because if a buyer is wrong and rates go down they can refinance, and if they are right - inflation persists, rents go higher and rates go higher - they’ve locked themselves in. Few buyers understand that this is an incredibly attractive instrument for the homeowner and that, if they plan to stay for the long term, they have a one-way bet.

Luxury Market 26 contracts were signed last week for Manhattan homes priced at $4M or above, 6 more than previous week – a strong performance in light of spiking interest rates. Condos were more popular than co-ops, with 17 condos selling compared to 6 co-ops, with three townhouses in the mix. This was the highest dollar volume of total sales since the week of July 10.?

Luxury properties are still in demand, and $20 million plus signed contracts surged 300%, year over year, regardless of the economy, indicating Manhattan still holds its position as one of the most sought-after residential markets with a worldwide audience for Ultra-high networth individuals.

Brooklyn's luxury market failed to break its recent slow streak, with only 11 homes priced at $2M or above going into contract.?

New Development Contracts signed for new condominium apartments fell in September to below pre-Covid levels in Manhattan, Brooklyn and Queens, according to data from Marketproof. It was the first month since January that such deals fell below their average from 2015 to 2019. The slump ends a relatively good run for new condo contracts which, powered by all-cash buyers and developers motivated to sell, has been a bright spot in the city’s home sales market.

For new development buyers, we’re seeing sponsors aggressive with negotiability and offering substantial concessions to try and facilitate deals.

Rental Market Over the last month, the average rental price in Manhattan decreased by 0.98%, from $4,839 to $4,792 breaking the streak of increasing rents over the past five months.?