In the second quarter, the Manhattan real estate market faced challenges due to economic uncertainty and higher borrowing costs. This created difficulties for both buyers and sellers. However, Manhattan remains a highly desirable location, leading buyers and sellers to adjust their expectations based on the current market conditions.
During Q2, residential real estate sales in Manhattan totaled $5.2 billion, with 2,548 transactions. This marked a 32.6% decline compared to the previous year but a 32.2% increase compared to the previous quarter. Contracts signed, which provide a more accurate reflection of the current market, saw a less drastic change. There was a 21.7% decrease compared to the previous year but a 22.6% increase compared to the previous quarter.
Contrary to expectations, the luxury market for properties priced between $5-10 million experienced a 17.4% increase compared to Q2 2022, with 175 contracts signed. Cash transactions became a preferred method for navigating rising mortgage rates. The luxury market showed positive momentum as financially well-off buyers regained confidence in making transactions. Cash transactions played a crucial role in these high-value deals.
Buyers looking for more affordable options turned their attention to the Upper East Side, known for its co-op properties. Co-ops accounted for 21.7% of all sales in Q2 and had a relatively higher inventory level, representing 21.6% of available properties. Buyers anticipate favorable deals in light of the uncertain economic climate, while sellers are not under immediate pressure to sell. This dynamic has primarily contributed to the decrease in market activity. However, significant life events and the undeniable appeal of living in the heart of New York City will continue to drive the real estate market forward.
Mortgage Rates The financial markets are telling us that there is a 95% probability that the Fed is going to increase rates by another 25 basis points to the range of 5.25 - 5.50%. The mortgage market has anticipated this move and we now see interest rates for 30-year fixed mortgages above 7.00%. The Fed is looking at historical, backward-looking data that is causing them to make the problem of affordability in housing worse.
However, there are reasons to be optimistic that we will see them begin to pause and eventually cut rates. The "soft landing" we have all been hoping for might be in our sights.
Luxury Market 23 contracts were signed last week in Manhattan at $4 million and above, 6 fewer than the previous week. Condos outsold co-ops 15-7, with one townhouse in the mix. The total may seem low but it is above the 10 year average of 19 contracts in the July 4th week.
Rental Market Over the last month, the average rental price in Manhattan increased by 0.78%, from $4,766 to $4,804. Overall, the average rental price in Manhattan increased by 2.67% from this time last year.