Manhattan apartment sales fell 18% in the third quarter, as rising mortgage rates and declining stock markets put the brakes on New York’s real estate comeback.
The drop is the first since 2020, and marks a turnaround for the nation’s largest real estate market, according to a report from Miller Samuel and Douglas Elliman. While prices in the Big Apple remain high – with the average Manhattan apartment price rising 4% over the past year to $1.96 million – price increases are slowing and the inventory of unsold homes is starting to rise.
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Sales in Manhattan last declined in the fourth quarter of 2020, when they fell by 21%.
“The boom in Manhattan has been interrupted,” said Jonathan Miller, CEO of Miller Samuel, a appraisal and research firm.
Brokers say the drop simply marks a return to normalcy after the artificially high sales of 2021. They say buyers and sellers are still active, and sellers are responding to higher mortgage rates with lower listing prices. The average discount – or the sale price compared to original list price – rose to 7% in the third quarter, up from 5.6% last year, according to Miller Samuel.
“The real sellers are meeting the buyers,” said Toni Haber of Compass.
Haber said she represents a potential buyer who was looking at a penthouse initially priced at $14 million, which came down to $12 million. She recommended putting in an offer of $9 million or $10 million “and if they take it, they take it.”
Many brokers, however, say sales are likely to decline further, as the stock market declines and rising mortgage rates continue to take a toll.
“The full impact on sales and prices won’t be known for at least another quarter,” according to a report from Brown Harris Stevens. Brown Harris said that half of the closings in the third quarter were signed before mid-May, and don’t reflect the full impact of rising rates.
Signed sales contracts for September fell 29% compared to a year ago, according to Miller Samuel and Douglas Elliman. Since signed contracts are an indicator for future quarters, sales in the fourth quarter are also likely to show a drop.
The high end of the market is showing the biggest declines. A report from Coldwell Banker Warburg found that both median discounts and median days on the market increased for apartments priced at $10 million or more. Co-ops in the “beautiful large pre-war apartments along Park and Fifth Avenues and Central Park West which have been aspirational homes for so many New Yorkers now linger for months, even years, without buyers,” according to the report.
Signed contracts in September for luxury apartments – those priced at $4 million or more – fell by 50%, according to Miller Samuel.
“There is more weakness as you skew higher in price,” Miller said.
Miller said the high end of the real estate market is more “discretionary,” since wealthy buyers and sellers typically have more freedom to decide when to buy or sell. Many sellers are holding off listing until the market improves. Wealthy buyers, meanwhile, are watching stocks fall over 20% and waiting for similar price drops in the real estate market.
“Between the volatility in financial markets and rising rates, we’re seeing the higher end disappoint,” he said.