The number of contracts signed in Manhattan saw a 50% jump week over week and a 18% jump month over month. This can likely be attributed to mortgage rates finally pulling back slightly and the last stretch of activity before the holiday slowdown. We have also seen large jumps in inventory pulled from the market, resulting in a 20% decrease in supply over the last month. We are still in an active buyer’s market and the future will depend on which way mortgage rates swing.
Interest Rate Relief Traditionally, mortgage rates were about 1.5% higher than the yield of 10 year treasury notes, but in recent years that has doubled. For context, with the 10 YR at 4.6%, that would mean mortgage rates for a 30 year fixed would be about 6.1%. However, they are currently at approximately 7.55%. There are a few reasons why this spread has increased so much. Lenders demand a higher return given economic uncertainty. Additionally, because they expect rates to continue to rise they demand a higher rate today. However, as it becomes more clear that the Fed is no longer going to raise rates and inflation has been tamed, we should see this spread regress to the historical average of 1.5%. When that happens, we will see mortgage rates begin to come down.
Luxury Market 20 contracts were signed in Manhattan at $4 million and above last week, 4 fewer than the previous week. Condos outsold coops, 14-3, with 1 condop and 2 townhouses in the mix.
In Brooklyn, 21 homes above $2 million entered contract. 9 were condos and 12 were townhomes. The average asking price was $3.4 million, or $1,304 per square foot. On average, the homes spent 212 days on the market and were priced at 5% less than their original listing price.
Cash Rules New Development For the second month in a row, new condo sales dipped below pre-pandemic levels in October, according to Marketproof. New luxury condos are usually less affected by high interest rates, given the ability of their buyers to pay with cash. To no surprise, cash buyers made up 72% of new development condo sales in Manhattan last month. Limited supply has also driven up unit prices.
Rental Market Pullback Manhattan rents dipped for the second straight month in October, signaling that rapid rent growth is a thing of the past. Manhattan’s median rent landed at $4,195 last month, a 3.6% drop from September, but still a 4.6% increase from the same month last year. The rental market peaked in August.
In Brooklyn, the median rent settled at $3,490 in October, a 5.7% decline from September and a 0.2% drop from the same month last year in 2022. October marked the first time in two years that Brooklyn rents did not increase year-over-year.