September Market Recap
After a very slow Summer when prospective buyers were seemingly "gone fishing" for anything but apartments, a looming question is what to expect this Fall and beyond. Based on current data and analyses by real estate experts, and what we are seeing on the ground, we anticipate low transaction volume through the end of the year and into early 2023, but we don't expect prices to drop off a cliff. As we are already seeing from September's figures (with new listings down 12% year-over-year), sellers who don't have to sell immediately will likely wait out the current interest rate environment which is expected to stabilize and improve next year after peaking in early 2023. Particularly with the robust rental market, many sellers will hold if they can rather than settle for lower prices, especially given that recovery of buyer demand (tied to interest rates) is on the horizon. Lower inventory should exert upward pressure on prices even in the face of lower demand, keeping prices relatively steady after the modest correction we've already seen. Data from September support this: even with contract activity down dramatically (-33.7% year-over-year), prices largely held steady with median sale prices and price per square foot essentially the same month-over-month and even up slightly year-over-year. Of course, not all sellers are able to hold their properties, so buyers can take advantage of discounts and negotiability, particularly on some products. And some buyers will shrug off currently high mortgage rates on the belief that they will be able to refinance at a lower rate relatively soon. Anecdotally, we are seeing more cash buyers than usual, even on entry-level coops which historically sell with financing. While the buyer pool is markedly smaller than a year ago, we have seen an uptick in activity across our listings since Labor Day, in terms of both appointment requests and offers received, with some listings even receiving multiple offers. So, at least some buyers are back from the Summer slump. Assuming no unexpected shifts in macroeconomic trends or October's market data, the sky is far from falling, though it might be a slower 6-12 months for us agents in Manhattan.
The Manhattan rental market, which was fodder for many news stories over the Summer (e.g. "July Scorcher: Manhattan Rents Hit $5000 For the First Time"), cooled slightly, but rental inventory remains tight and prices are still well above pre-pandemic averages. All these forces are interrelated, and as rents normalize and even go down, that should rein in inflation, which in turn feeds into Fed policy on interest rates, and so it goes.
In Brooklyn, inventory shrunk further with both new listings and total supply down by double digit percentages year-over-year in September. This kept days on market and median price metrics even with last year despite substantial drops in contract and sales activity. Continuing the trend from previous months, Brooklyn metrics varied dramatically based on area and property type. As we’ve come to expect, NW Brooklyn – which includes high demand areas like Cobble Hill, Carroll Gardens, Fort Greene and Park Slope – had a far higher share of total signed contracts (29%) than inventory (23%), whereas South Brooklyn accounted for 52% of total listings but only 48% of contracts.
Rising residential rents drove last month's inflation figures with the surging cost of shelter accounting for about 40% of last month’s cost of living increase. (THE REAL DEAL)
According to a recent report, homes most vulnerable to price declines in a potential economic downturn are found in the suburbs of New York City (most in NJ), Chicago metropolitan area, and throughout California. (BLOOMBERG)
September homebuying activity in NYC and its suburbs were down 20 - 30% across the board last month compared to a year ago but still above normal levels. (THE REAL DEAL)
The real-estate sector is still adjusting to rising mortgage rates, recession fears, and a strong job market, which in NYC has led to highly unpredictable results; one property might sell in three days with three offers, while a similar one a block away can remain on the market for three months without a bid. (MARKETWATCH)
The U.N. calls on the Fed and other Central Banks to halt interest-rate increases, warning that further policy tightening risks pushing the global economy into recession followed by prolonged stagnation. (WALL STREET JOURNAL)