The NYC real estate market sent mixed signals in the third quarter but one thing is clear, the great reshuffle has ended and the market has returned to a more normal pace. While the total number of apartments sold during the quarter was down by only 4% compared to last year, signed contracts, a more immediate metric, fell 29% year over year as reported by The Corcoran Manhattan Real Estate Market Report: 3Q 2022.
Other market reports quoted apartment sales falling by 18%. Such dramatic drops might lead you to conclude that the market is falling off a cliff but the actual number of signed contracts are solid and higher numbers than those recorded in 2018 or 2019. These last quarter sales were simply being compared to the historic volume of the 2021 market.
Price gains leveled off in the quarter due to inflation and higher mortgage rates taking their toll on demand. Yet, days on market fell to 86 days, shrinking by 30% year over year as buyers made quick decisions to beat further mortgage rate escalations and avoid an expensive rental market.
After a historic number of sales for nearly eighteen months, many buyers and sellers, who put their plans on hold during 2020, have now successfully transacted, which is impacting availability. Inventory levels shrank for the fifth consecutive quarter, ending at 6,680. Availability under $1million decreased the most offering opportunity for sellers in the coming months, while available apartments over $3 million saw a 5% increase in availability.
Co-ops emerged as the winner with buyers flocking to these investments for their value. All eyes will be on mortgage rates for the rest of the year. Having hit a fifteen year high of 6.7%, there is a reasonable expectation that the market could slow down and prices could drop.
Certainly, affordability has shifted, which is likely to favor the market below $3 million. In the face of declining demand for mortgages, many banks are offering a variety of incentives to keep buyers engaged, particularly in Northern Manhattan. Incentives include rates well below the prevailing interest rate, dramatically reduced down payment requirements, and even cash toward closing costs.