Guests attend a pool party in a penthouse apartment in New York.
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Manhattan real estate sales fell 38% in the first quarter, as buyers and sellers battled over prices and mortgage rates remained volatile, according to new reports.
Total sales volume fell to $4.4 billion in the quarter, with 2,242 apartments and townhouses sold, compared to 2,546 sales in the first quarter of 2022, according to a report from Douglas Elliman and Miller Samuel. The average sales price fell 5% to $1.95 million and the median sales price fell 10% to $1.075 million, according to the report.
The drop in sales and prices follows a 29% decline in the fourth quarter, and suggests that the nation's largest real estate market is correcting after a post-pandemic boom in prices and demand. The big question for brokers, buyers and sellers is where the new "bottom" will be in Manhattan.
"I think we'll see a seasonal uptick in the spring," said Jonathan Miller, CEO of Miller Samuel, the appraisal and research firm. "But some of it depends on whether the [Federal Reserve] holds rates where they are."
Brokers say the biggest challenge for deals is the wide gap between buyer and seller price expectations. Relatively low levels of inventory, or unsold listings, means that buyers still don't have much choice in Manhattan. There were 6,996 homes on the market in the first quarter, slightly lower than the five-year average of around 7,200, according to Miller Samuel.
"There still is a disconnect between buyers and sellers," said Jason Haber at Compass. "Sellers are not slashing prices left and right to get deals done. They have confidence. They feel like 'if I lose a buyer there's another one down the road waiting.' There is a no panic selling, or thinking they have to get out now."
Sellers have trimmed prices, but not enough for today's bargain-hunting buyers. The average discount from the initial list price to sales price in the first quarter price was 7%, up from 5% in the fourth quarter, according to Serhant. "Weary buyers were still in a strong position to negotiate," according to Coury Napier, director of research at Serhant.
Buyers still fear overpaying in the face of a potential recession, volatile stock market and banking crisis. Many brokers say buyers have been calling for months with expectations of price cuts of 20% or more — only to be disappointed.
"Buyers for the last three quarters have been sitting back, waiting for massive reductions and they're not coming," said Noble Black of Douglas Elliman. "And I don't think those big reductions will come."
As Frederick Warburg Peters, president of Coldwell Banker Warburg, said in his first-quarter report, "The big price decreases seem behind us, and property costs have plateaued."
Bidding and interest has remained especially strong at the high end. The share of luxury sales — or deals in the top 10% of the market by price — that resulted in bidding wars rose to a record high of over 11% in the quarter, Miller said. Brokers say wealthy buyers usually prefer to pay cash and therefore are less affected by higher mortgage rates.
Overall, cash deals rose to a record 57% of all sales in the quarter, Miller said. At the high end of the market, three-quarters of all sales over $5 million were all cash.
Brokers say they're seeing signs that the second quarter will be stronger — especially since the higher-end market improved over the course of the first quarter. Sales contracts for properties priced at $4 million or more increased from an average of 16 deals a week in January to 32 deals a week in March, according to the Olshan Report.
Still, a lot depends on the future of interest rates and the overall economy. Because New York City is home to so many buyers and sellers tied to finance, the performance of the stock market could also shape Manhattan's housing market this spring and summer.
"Based on what I see now, we're getting to a healthier place in the spring," Black said. "It's not by any stretch a seller's market, but it's getting busier each month."
As an expert in real estate trends and market analysis, I can provide a comprehensive breakdown of the concepts mentioned in the article about Manhattan real estate sales. My extensive knowledge in this field allows me to interpret the data and offer insights into the factors influencing the market.
The article discusses the performance of the Manhattan real estate market in the first quarter, highlighting a significant 38% decline in sales. This decrease is attributed to the negotiation challenges between buyers and sellers regarding prices, coupled with the volatility of mortgage rates. The information is derived from a report by Douglas Elliman and Miller Samuel, which are reputable sources in real estate analysis.
The total sales volume for the quarter amounted to $4.4 billion, involving the sale of 2,242 apartments and townhouses, compared to 2,546 sales in the same period of the previous year. The average sales price experienced a 5% decline, reaching $1.95 million, while the median sales price dropped by 10% to $1.075 million.
The overall trend suggests a correction in the Manhattan real estate market after a post-pandemic surge in prices and demand. Jonathan Miller, CEO of Miller Samuel, anticipates a potential seasonal uptick in the spring, contingent on the Federal Reserve's decision regarding interest rates.
One of the key challenges identified by brokers is the substantial gap between the expectations of buyers and sellers in terms of pricing. Despite a relatively low inventory, with 6,996 homes on the market, the discrepancy in pricing expectations hinders deals. The article emphasizes the confidence of sellers who are not rushing to slash prices, leading to a situation where buyers, although in a strong negotiating position, still face challenges.
Buyers are hesitant, fearing overpayment in the midst of concerns about a potential recession, a volatile stock market, and a banking crisis. Despite expectations of significant price cuts, buyers are reportedly not seeing the anticipated reductions. This sentiment is echoed by industry experts like Noble Black of Douglas Elliman.
The article also notes that the luxury segment, representing the top 10% of the market by price, has shown resilience with a record-high share of bidding wars, surpassing 11%. Cash deals, particularly prevalent among wealthy buyers, reached a record 57% of all sales in the quarter, emphasizing the strength of the high-end market.
While the second quarter is anticipated to be stronger, especially in the higher-end market, uncertainties remain, with future interest rates and the overall economic landscape playing crucial roles. The performance of the stock market, given the finance-centric nature of New York City, is highlighted as a factor that could shape Manhattan's housing market in the coming months. Overall, the market is described as transitioning to a healthier state, albeit not yet a seller's market.
