Is Manhattan's Real Estate Sales Market Recovering?

Michael Holt  |  May 17, 2024

Holt's Monthly Market

Is Manhattan's Real Estate Sales Market Recovering?

Is Manhattan's Real Estate Sales Market Recovering?

Following a prolonged period of stagnation, Manhattan and Brooklyn are experiencing a modest recovery. The critical question is whether this improvement will endure. As we reach the midpoint of this active season, it's clear the market has struggled, with 19 out of the past 21 months showing below-average deal activity. Prices have dropped roughly 12% year-over-year, though inventory remains typical for this time of year. Buyers are securing discounts near 6% off original asking prices. Despite an optimistic start, rising mortgage rates and limited Fed rate cuts may dampen spring activity. Here’s how to navigate this market.

A Long-Duration Cycle of Low Contract Activity

Markets have certainly improved compared to five or six months ago, potentially marking the end of the recent downturn late last year. The key questions now are: How much further will the market rise, and is this uptick in activity sustainable? Since spring 2022, we haven't consistently seen above-average deal volumes. The gap between current market activity and typical seasonal levels has been shrinking, from 20% below in December 2023 to just 7% below by February 2024, driven by declining mortgage rates. However, as rates began rising again in March, the deficit widened to 12%.

The decline in market activity is evident when examining market liquidity, measured by the rolling 30-day count of signed deals. Contracts rose with the spring season in February, but momentum stalled by March. By mid-April, buyers seemed to have paused, as liquidity dropped to a neutral level instead of staying elevated above 1,000 deals, which is expected until mid-June.

Median Price Per Square Foot Falls 12% Since Last Spring

Recent closing data confirms that the market, after a period of slowdown, is now rebounding. The median price per square foot fell 12% from its peak, dropping from $1,474/sqft to $1,290/sqft over the last four to five months. With the ongoing recovery, it's likely that some of this decline has already been recuperated, indicating a shift from a buyer-dominated market to a more balanced, neutral environment. It has become increasingly unlikely that the Fed will reduce interest rates this year. Consequently, mortgage rates, which fell from October to December, have been rising again recently. This uptick in rates poses a potential threat to the intensity and duration of the seasonal market recovery.

In Conclusion

Our markets are experiencing a modest recovery from the lows of late last year, reaching a more balanced state, though deal activity remains below normal. Prices have declined over the past year but are now showing signs of a slight rebound from last year’s lows. This is not a seller's market. Considering rates, a key factor in buyer confidence and activity, we must question whether current conditions are the best we will see for the spring season.

Advice For Selling in Manhattan's Current 2024 Real Estate Market

The spring active season extends until early June, assuming no external disruptions. With rising rates, expect the remaining active months to be lighter than usual, continuing a trend from recent years. Sellers should consider making critical decisions early and adopt aggressive price reduction strategies to stimulate market interest before the season ends. For those listing later this year, be mindful of potential risks such as election uncertainty, macroeconomic factors, interest rate fluctuations, equity market volatility, and overall market conditions influenced by these elements.

Advice For Buyers in Manhattan's Current 2024 Real Estate Market

The market has rebounded from the lows of late last year, with buyers losing some leverage, but the pendulum may be swinging back as contract activity declines. Buyers with immediate needs face a neutral market with 6% negotiability, decent inventory, and recovering prices. For those with patience, an early peak in the spring season could present better leverage and pricing opportunities during the summer. 

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