A Q1 Digest of the 2022 Manhattan Real Estate Market

In the coming days and weeks, real estate publications and brokerages throughout the city will start publishing their Q1 reports for the 2022 Manhattan real estate market. The numbers, previewed by UrbanDigs below will look something like this:

What these publications will fail to tell you is that closed data is a lagging indicator. It is especially true in a market like NYC where the vast majority of closed sales are coop apartments which take on average 60-90 days from the time you sign the contract to close.

That means that the overwhelming majority of the deals closed in both Q1 of 2021 and Q1 of 2022 were likely signed into contract between October, November, and December of the previous year.

As many people are now aware, the market really started to pick up steam in both contract signings and to some extent pricing around Q1 of last year. Pricing really started to see an increase in Q2 and onward of 2021.

This is important to keep in mind as one looks at the above chart. The chart paints the picture that the market has drastically changed from Q1 of 2021 – Q1 of 2022. While this is true to some extent, the more drastic change occurred from Q4 of 2020- Q4 of 2021. A subtle but very meaningful difference.

During Q4 of 2020, the market was just starting to regain its strength after being locked down for the vast majority of the year. Remember, apartments weren’t even allowed to be shown until July of 2020. Contract signings and pricing were way down year over year and people who had the foresight to buy at this time when the market was still very nervous, have been rewarded handsomely- with a little under a 20% gain on their equity positions.

By Q4 of 2021, that narrative had completely shifted. The market had shifted to a seller’s market and the numbers accurately reflect this difference in mindset.

Q1 of 2021 however was not the same as Q4 of 2020. In fact, it was these deals in Q4 of 2020 that helped catapult the market into such a strong rebound, and both pricing and to a much larger extent contract signings surged in Q1 of 2021.

As a result, a much more reliable indicator that I like to use is contract signings. Contract signings measure the activity in the market at that given time. Activity surged in Q1 of 2021. When activity surges, prices follow.

The picture becomes much different when you look at contract signings. As you can tell from the chart above, activity is relatively the same for both Q1 of 2021 and Q1 of 2022. Yes, prices have risen in that time, but not as drastically as the first chart will have you believe. We will not know exactly how much for another three months.

The year-over-year changes are jarring because the data that is used misrepresents market sentiment at the time. The quarter to quarter changes actually suggests we may be in line for a topping of pricing as pricing has even decreased a little from Q4 2021 – Q1 2022. This is no surprise as Q1 of 2022 is really the winter months of 2021 which is always seasonally affected and Q4 of 2021 is really the summer months of 2021 where the market is typically slightly stronger.

What’s important is that the activity has remained year over year. Once activity starts to decrease, pricing will follow to keep the market in equilibrium.