The spring Manhattan real estate market of 2024 is slower than normal and is not what we had hoped for or anticipated. We had every reason to be optimistic. Stocks had an exceptional first quarter, with both the Dow and S&P 500 indexes reaching record highs, Wall Street paid $33.8 billion in cash bonuses for 2023, and we were told that the Fed would lower rates sooner rather than later. Bolstering our confidence, there was a noticeable increase in signed contracts in January and February spurred by lower interest rates, rising consumer confidence, a strong stock market, and a rise in new listings which led to an increase in signed contracts year over year.
But surprisingly, as we headed towards the height of the spring market, we saw a sudden pullback of signed contracts in March. Interest rates began rising again in mid-February, causing buyers to pause their search and would-be sellers from listing their apartments. Moreover, the stock market became increasingly volatile, the geo-political situation more precarious, and we learned that thanks to stubbornly high inflation, the multiple rate reductions we were told to expect may not happen at all this year. The result is that many would-be buyers and sellers are sitting on the sidelines taking a “wait and see” approach.
The number of sales of Manhattan co-ops and condos dropped to 1,988 in the first quarter of 2024, representing an 11% dip from Q1 2023 and a 17% plunge from Q4 2023 -- the first time the number of sales dipped below 2,000 in three years.
The median sale price for co-ops showed improvement over 2023 levels, posting a gain of 2% to reach a median sale price of $815,000, while the price of luxury homes (properties priced $4 million and up), which represent the top 10% of the market, climbing nearly 3% over the 2023 median to $5.8 million, marking the
fourth consecutive quarter with a year-over-year price increase at the high end of the market. Luxury listing inventory also increased on a yearly basis, the first time it’s done so in over a year. There were 1,628 active luxury listings in the first quarter, a 9% annual increase and 16.5% higher than the final quarter of 2023. The most notable bright spot, though, was with new development condos. Even though their sales slowed, the a that did trade managed to command strong prices. In fact, they scored a median of $2.1 million last quarter, or $2,400 per square foot, a 31% increase over Q1 2023.
The category that is suffering the most in this market is coops in need of work. The cost of a renovation has increased dramatically in recent years with the renovation cost in a top building now estimated at $1,000 per square foot. The expense coupled with supply-chain issues and the expense of having to cover two homes for perhaps up to two years means that the price has to be compelling to buyers and perceived as a “deal” in order to have a chance of success in selling. Not surprisingly, the effect of high interest rates is having an impact on sales. According to noted real estate appraiser Jonathan Miller, “The market is still highly
dependent on cash sales,” which accounted for an astounding 63% of closed transaction in Q1 2024, marking the third highest quarter of cash sales since Miller started tracking the metric ten years ago. On an annual basis, cash deals rose 1.5%, while mortgage-related transactions plummeted nearly 27%. After hitting a recent peak of 8% in October, the average interest rate for a 30-year mortgage has hovered in the 7% range, which, while not historically high, is nevertheless well above the 4% rate available in early 2022, before the Federal Reserve began hiking interest rates in its effort to curb inflation.
While the spring market is somewhat lackluster that doesn’t mean that opportunities don’t exist. Au contraire! We are advising our sellers that this period is likely the best the market will be this year and to make their decisions accordingly. June is 6 weeks away and we have a presidential election this fall which tends to be a slow period for sales. Pricing continues to remain key. Per Jonathan Miller, “for the 38.5% of sales that required a price cut, 58.4% required one cut, 26.8% required two cuts, and 14.8% required three cuts.
Approximately 35.6% of sales needed a price cut a year ago. For properties that sold for less than $2 million, the average days on the market that required no price adjustment were 12, but for listings requiring a price change, it was 198 days! Unlike national housing market conditions, first-time Manhattan buyers account for 27.3% of the market share, the lowest tracked in a decade. The international buyers’ market share remains weak, accounting for only 8.7% of all sales, the third-lowest share in a decade of tracking.”
Our friends at Urban Digs have studied the data and noted that for a price reduction to be effective it needs to be at least 7%. While this is unwelcome and disappointing news for many sellers, as I continue to remind our clients, “hope is not a strategy.” As unpalatable as it may be, you are likely better served by taking the loss and investing the funds into another asset class with a higher potential return. To wit: you would have made 10% in just the first quarter of this year by investing in the S&P 500. I believe this is an opportune time for buyers to get in the game, particularly if you are a
well-qualified buyer, don’t need to finance or just need to take out a small mortgage. With many buyers on the sidelines, there is not a lot of competition at the moment and if you are willing to do work, there is great value to be had! Bargains abound! And with rents so high, parents in the position to do so should consider purchasing an apartment for their recent graduates. With the rental market so strong and vacancy rates at record lows this is the time to consider buying an apartment as an investment and getting a consistent stream of rental income.
Despite a slower than expected start to 2024, there are many reasons to be optimistic. The market is better than it was last fall, buyers are out there and there is considerable pent-up demand. Rental prices remain very high. So long as your property is priced appropriately and realistically, taking into consideration both condition and the monthly costs, you will be able to sell your home. Many workers are back in the office 5 days per week and I can tell you anecdotally as the mother of a Georgetown senior, that the vast majority of young college graduates are coming to New York. This is
where they want to be! New York continues to be the greatest city in this country. It is the center of the financial industry, the legal industry, the fashion industry, the arts and entertainment industry, the news industry and it has many of the nation’s best restaurants, museums, hospitals and universities. We have the U.S. Open, the Yankees, the Giants -- and much to our current delight --the Knicks! It is not an inexpensive city to be sure, but for those of us lucky enough to be able to afford to live here, we are truly privileged.
I love this quote from America and Americans by John Steinbeck:
“New York is an ugly city, a dirty city, the climate is a scandal, its politics are used to frighten children, its traffic is madness, its competition is murderous. But there is one thing about it: once you have lived in New York and it has become your home, no place else is good enough.”
We agree! If you are thinking of buying, selling or renting, or just want more information about your home or the market, please don’t hesitate to reach out. We’d be delighted to hear from you!
