The first quarter story was all about shifts in the market but ultimately the NYC real estate market remains stable. A variety of economic factors caused buyers to pause at the beginning of the year. Interest rate hikes, stock market fluctuations, and the recent bank collapses had a dampening effect on demand.
In turn, many sellers reacted by lowering prices and deepening negotiability. Some potential sellers delayed their plans of marketing their properties altogether. They either resigned themselves to staying in their homes for a while longer or they rented them out hoping future pricing trends would yield better gains keeping inventory balanced.
Inventory increased by only 3% in the first quarter. It is interesting to note that inventory below $1 million fell 13% annually while listings over $1 million increased by 12%. If you are considering buying or selling in the coming months it is best to partner with a local real estate expert to understand the inventory position in your segment of the market.
The median price declined in the first quarter by 15% compared to last year at this time. The average price dipped only 4% which is a better indication of pricing given that sales under $1 million made up 50% of the closings for the first time in three years accounting for the more dramatic drop in the median price. Depending on the property and the pricing strategy negotiability has been at approximately 3-7% over the past six months.
A slowdown in demand resulted in inventory only increasing 3%. It is interesting to note that inventory below $1 million fell 13% annually while listings over $1 million increased by 12%.
Market-wide closings are down 38% YOY, returning to a pace seen during the first quarters of historically slower years from 2018 through 2020, but we saw a notable uptick in signed contract activity starting in mid-February.
As of last week, the total number of reported contracts in 2023 is down 30% year-over-year. It is important to remember that 2021 and 2022 had higher transaction volumes than normal in the wake of the pandemic.
What’s Ahead for 2023
There are new challenges in this new market which is more closely aligned to a normal transaction pace.
One consistent trend which emerged last year was renters seeking protection from dramatically increased rental prices by moving into the purchase market. Many sought assistance for the down payment from family members who saw the value in creating wealth through owning property in NYC.
Once buyers get comfortable with the new mortgage rate reality, we are likely to see this trend continue as Spring brings a new crop of lease renewals and landlords increase rents from 10-40%.
If you are thinking of selling, be certain your property is in move-in condition or be ready to negotiate. Buyers are looking for ease of caring for a property as they pay more.
Macroeconomic trends will have a big impact on the NYC market for the remainder of the year. The average 30-year fixed rate hovered at close to 7% a month ago and has dropped by nearly .75%-6.25%, the lowest level in eight weeks.
Many economists expect that mortgage rates will continue to come down slowly over the course of the year enticing buyers to come back. Inflation has dropped to 5% well below the 9% we saw last year giving consumers more confidence.
How to take advantage of this market?
Consider purchasing in new development. Developers looking to move inventory are likely to make good deals today which might not be available later this year. The key is to look for a building which is projecting closing dates later this year. Lock in a good mortgage rate with a free float down and you will have gotten a great sale price and a good mortgage rate.