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Two weeks into the new year, the 2024 real estate market shows considerable promise. The final quarter of 2023 continued the trend of low sales volume but concluded with positive momentum. Anecdotally we are already seeing an increase in new buyer consultations, a rise in showing inquiries, a notable uptick in signed contracts in BK, and the anticipation of several new listings. While the upcoming election adds some uncertainty to to come in the Fall, the backlog of activity accumulated over 18 months of low buyer and seller activity holds the promise of a robust market so long as economic conditions (stock market, inflation, mortgage) hold relatively stable or improve. Stay tuned for our January report out in a few weeks to see if the numbers track what we're seeing on the ground.
If inventory and mortgage rates continue to normalize, we anticipate a surge in transactions that buyers and sellers have postponed for 12-24 months. If you've delayed buying or selling, now is the ideal time to contact us for strategic positioning in anticipation of what 2024 holds.
Low inventory continued to be a stabilizing force on prices but kept transaction volume low. While the total number of closed sales was down 10.2% year-over-year, active inventory and contracts signed were up compared to last year, showing positive movement as we transition into 2024. Despite rates, low supply and increased contracts drove prices to the highest levels we've seen since 2018 both for condos and co-ops. Many are speculating that the bottom -- which was a bit anticlimactic in terms of "deals" -- is now behind us, while many would-be buyers were waiting for it to happen.
New developments are moving quickly and helping to propel climbing prices, but resale inventory has continued to stagnate and is the market's current limiting factor. This comes as no surprise, as approximately 40% of would-be sellers are locked into ultra-low mortgages, and the data indicates they are still not interested in providing significant discounts. As rates decline, a resurgence in resale transactions in 2024 is possible, as buyers effectively have access to additional capital, and sellers on the sidelines with low-rate mortgages are more willing to take the plunge with a new purchase.
The Brooklyn market was not immune to the effects of high mortgage rates and record-low inventory, but the year-end showed some improvement and the potential for a busier market in 2024. The total number of signed contracts increased 16% from the third quarter, the first year-over-year increase in signed contracts in almost two years.
Lack of inventory continues to paralyze Brooklyn and is self-reinforcing. Would-be sellers are trapped in their low-rate mortgages, and beyond that know that once they sell there is little inventory for their subsequent purchase. Fewer new development launches in the end of 2023 only further exacerbated this problem. We'd expect that even some modest relief in inventory levels will unlock the market, driving more sellers to enter the market which would, in-turn, release pent-up inventory further.
With record low available listings in prime neighborhoods, many buyers turned to resale co-ops and/or locations farther east and south pushing median and average prices down. These declines bring marketwide prices below where they were during the sizzling market of 2021, but essentially level with their five-year historical averages. Despite the decrease in these averages, Brooklyn remains an incredibly in-demand and competitive market with bidding wars on one-in-five sales.
Rates are down more than 100 bps from their peak in October, and are now hovering in the low-6s. While all are anticipating rates to decline in 2024 as the Federal Reserve has made clear that they plan to lower the Fed Funds Rate by 75 bps in 2024, it’s not clear if that path will include one final rate hike before the rate cuts. Mortgage banks are cautiously optimistic of rate cuts sooner than later, and all eyes are on Jerome Powell as he announces the Fed’s outlook at their next meeting on January 31.
The share of all-cash buyers in Manhattan hit an all-time high in the fourth quarter of 2023 at 67.9%, up 17.6% year-over-year and compared to figures between 40-50% historically. The surge in cash deals likely reflects the market’s anticipation that rates will be lower in the next few years and there will be an opportunity to obtain a lower-rate mortgage.
Despite stocks experiencing a seventh consecutive week of gains, traders might be overly optimistic about expecting rate cuts early next year. The next step is not when to cut rates, but to decide how long to keep policy restrictive.
In the fourth quarter, there were 9.1% more sales (amounting to 37.6% jump in transaction volume) at the $20 million-plus price range compared to last year. New signed contracts, which provide a more real-time measure of market activity, also saw strong activity from deep-pocketed Manhattan buyers in the fourth quarter.
If you are upgrading your New York City apartment or brownstone, then you are no doubt all too familiar with the U.S.'s supply chain crisis. Even design pros are grappling with getting materials—as in lumber, paint, and so much more—for their projects. Here is how to get around the supply chain crisis when you're updating your NYC apartment or brownstone.