Spring Sales Market Shows Signs of Slowing Down as Rates Remain Elevated

Elevated rates continue to dominate the NYC residential sales market. As we have spoken about ad nauseam in this Market Report, trying to predict what rates are going to do is a fool's errand.

Anyone who confidently proclaims that rates are going to decrease in x amount of time is simply not being honest with themselves. Even the Fed doesn't know what future rates will look like, so how can your neighbor, parent, sibling, attorney, or real estate agent?

The fed originally had seven price cuts scheduled for this year. We are now lucky if we get one, and if you haven't thought of it yet- they may increase before the end of the year. Will rates come down eventually? Yes. Will it be next year or ten years? Only time will tell.

When purchasing in this market, you must plan on living at the rate you close on for a minimum of 5 years. If you cannot afford those carrying costs you need to lower your budget or continue renting until you can save more money.

I cannot tell you how many stories I have been getting of people purchasing homes last year with the expectations that rates were going to drop and are already struggling to make ends meet. Please do not get yourself into this situation.

Buyers are starting to take notice as well. Contract signing is down 10% from last week and Manhattan signed contracts failed to crack 1,000 for the month of April. While this is only down 4% year over year, more alarmingly, apartments taken off the market in April increased 23% year over year.

This is the prime selling season, and sellers de-listing that many units coupled with decreased transactions are the first signs that the market may be heading towards another downturn.

There is no doubt the market is in a much better place than where we were at the end of last year. Sellers have much more leverage and as such, transaction volume has been, until recently, increasing.

New York is unlike other markets- there are few forced sellers. Therefore, when markets shift to heavy buyer markets, transaction volume plummets.

Of course, some sellers will always need to transact, but the vast majority of NYC property owners can afford to hold on for a couple of years to see if the market turns around.

That is why such a large increase in de-listed units along with the decrease in contract activity is something to keep an eye on. Instead of lowering prices, many owners will simply de-list their units. We may be on the precipice of this.