What’s happening in the New York City real estate market? The most important thing you need to know is the market changed in the second quarter but that doesn’t mean it’s a bad market. It is still a good market; it is just not the same market it was at the beginning of April. The second quarter was strong. While the Fed poured ice water on the hot, raging national housing market, Manhattan has only moderated slightly. Demand remains strong and half of the buyers pay cash so they are not impacted by rising mortgage rates.
What happened in the second quarter?
Sales volume slowed and prices increased. How is that possible? Because we measure sales by the number of signed contracts whereas pricing is measured by closed deals. There is a time lag between the time you sign a contract and the time you close which is anywhere from three to six months. So sales are a lagging indicator. It tells us that deals inked in the first quarter were at higher prices than at the end of 2021.
Did prices go up in the Second Quarter?
Yes. In the second quarter Manhattan pricing stats climbed. The median price increased by 4% bringing it to $1,246,000 buoyed by the number of sales over $5million and strong demand which limited negotiability. The average price per square foot rose 6% to $1,834 which is 5% shy of the peak we saw in the first quarter of 2017. These are aggregate numbers If you want a more granular understanding of your particular property or buying goals, please ask me.
Are mortgage rates going up or down?
The answer is both. Expect volatility. Mortgage rates hit a high they had not seen since 2008 and then came down. What impact this has on pricing in Manhattan will be interesting to watch. Approximately 50% of the buyers pay cash so those buyers may be waiting for prices to come down before jumping into the market. Meanwhile sky-high rents are high pushing renters into the purchase market. How these two forces impact demand over the next quarter is uncertain. I can tell you that I continue to see demand driven by buyers taking shelter from a hot rental market and people relocating to Manhattan from other parts of the country even if it is just a second home.
Prices are going down across the country which means prices in New York City are going down too, right?
No. Right now I am having conversations with buyers and sellers who are confusing the national housing market with the Manhattan housing market. Real estate is granular so do not draw conclusions based on headlines. Have a conversation with a local real estate professional Another word of caution: do not assume that the housing market of 2008 will be repeated. Right now, credit is carefully regulated and across the United States and demand outstrips supply. While price appreciation is slowing in many parts of the country, there is no crash on the horizon.
Are prices going to go down in New York City?
It is too early to say but certainly sales volume slowed in the second quarter. After six consecutive quarters of sales growth the market slowed down from what could be called an exuberant level of sales to a more normal, healthy sales pace. This moderating market delivered just over 4,100 contracts signed which is 6% above the ten-year quarterly average. The market is healthy in New York City.
Is there enough inventory to choose from?
At the end of June, there were 7,500 homes on the market for sale. This is an ample amount of supply if you consider that there were approximately 4,100 contracts signed in the second quarter and about 4,900 in the first quarter. The one shifting trend I am seeing is that the ability to work from home is making the suburbs more attractive to young families who used to stay in the city. Dual career couples no longer need to worry about being separated from their children for long periods of time during the work week. In the second quarter we saw more interest in buying pied a terres in NYC as the rental prices climbed. Of note are the ten new development buildings which launched sales. One of my favorites is Claremont Hall. Ask me why.
Should you rent or buy now?
If you are renting, you need to fix your housing costs. Here is why. Looking at the May Corcoran rental report, we see that rents are high in New York City having risen anywhere from 30% to 53% in core neighborhoods. Further north Central Harlem saw a 15% increase and the Financial District is up 24%. Rental prices are likely to keep escalating due to demand and inflation so jump in and buy today. If mortgage rates go up, you look like a genius and if they go down, you can refinance.
Should I sell now or wait?
You could have listed your home with anybody a year ago and could have had a successful outcome but that is not the case today. Now it takes a different strategy and more skill to get properties sold. Is your agent taking a multi-pronged approach to finding buyers? We posted a TikTok about our most recent listing, a well-priced two bedroom and it had over 13,000 views. We not only had multiple inquiries resulting in showings but we also had a contract signed.
What’s ahead for NYC housing?
The global headwinds facing all markets include high inflation, rising mortgage rates, stock market volatility, and recession fears. Much depends on the Fed’s decision to raise interest rates at the end of July. If they do, prices could soften in New York City if demand is significantly impacted. If you are a cash buyer this will be an interesting time to be in the market. Even if you are securing a mortgage, interest rates are historically very reasonable.