BackIn the first quarter, Manhattan's property sales experienced a 38% decline as pricing disputes arose between buyers and sellers, and mortgage rates continued to fluctuate, according to recent studies.
The total sales volume dropped to $4.4 billion during the quarter, with 2,242 apartments and townhouses sold, in contrast to the 2,546 sales in Q1 of 2022, as reported by Douglas Elliman and Miller Samuel. The average sales price decreased by 5% to $1.95 million, and the median sales price fell by 10% to $1.075 million, as per the study.
Following a 29% reduction in the fourth quarter, this decrease in sales and prices indicates a correction in the nation's largest property market after the post-pandemic surge in demand and pricing. The primary concern for brokers, buyers, and sellers is determining the new "floor" in Manhattan's market.
Jonathan Miller, CEO of Miller Samuel, the appraisal and research company, said, “I anticipate a seasonal increase in spring, but it partly depends on whether the [Federal Reserve] maintains the current rates.”
The most significant obstacle to closing deals, according to brokers, is the substantial difference in pricing expectations between buyers and sellers. Limited inventory in Manhattan means buyers have few options. In the first quarter, there were 6,996 homes available, slightly below the five-year average of approximately 7,200, as per Miller Samuel.
Jason Haber at Compass commented, “There remains a disconnect between buyers and sellers. Sellers are not hastily reducing prices to close deals. They remain confident, believing that if one buyer is lost, another will soon appear. There is no sense of urgency to sell or feeling the need to exit the market immediately.”
Although sellers have reduced their prices, it has not been enough for value-seeking buyers. The average discount from the initial listing price to the sales price in Q1 was 7%, up from 5% in Q4, according to Serhant. Coury Napier, Serhant's director of research, noted that "cautious buyers maintained a strong negotiating position."
Buyers remain wary of overpaying due to concerns about a possible recession, unstable stock market, and banking crisis. Many brokers claim that buyers have been expecting price reductions of 20% or more for months, only to be let down.
Noble Black of Douglas Elliman stated, “For the past three quarters, buyers have been holding back, waiting for significant price drops that aren't materializing, and I don't think they will.”
Coldwell Banker Warburg President Frederick Warburg Peters mentioned in his Q1 report, “Major price reductions appear to be behind us, with property costs stabilizing.”
Bidding and interest have remained high, especially in the luxury market. The percentage of luxury sales, or the top 10% of the market by price, that resulted in bidding wars reached a record high of over 11% in Q1, according to Miller. Brokers claim that affluent buyers, who typically prefer cash transactions, are less affected by rising mortgage rates.
Overall, cash transactions accounted for a record 57% of all sales in Q1, as reported by Miller. In the high-end market, 75% of sales over $5 million were all-cash transactions.
Brokers have noticed indications that Q2 may be more robust, particularly since the high-end market improved throughout Q1. Sales of homes priced at $4 million or above double throughout the quarter, going from 16 transactions in January to 32 in March.
According to Black, the market is shaping up to be quite healthy by the end of the spring as it gets busier from month to month.
With that being said, a sizable percentage of buyers and sellers have their homes financed, so the performance of the Manhattan housing market could be heavily influenced by how the stock market fares.
