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Manhattan Condo Sales Plunge in Q4, Brokers Fear Market Freeze

Manhattan apartment sales fell 29% in the fourth quarter, raising fears that the economy and interest rate woes could freeze the market as buyers and sellers sit on the sidelines.

Douglas Elliman and Miller Samuel report that sales for the quarter were 2,546, down from 3,560 last year. The decline was the largest since the third quarter of his 2020, during a severe time of the pandemic.

Prices also fell for the first time since early 2020, with a median drop of 5.5%.

Drops in both sales and prices mark the end of Manhattan’s real estate roaring resurgence after the worst days of the pandemic, fueling fears of a continued downturn heading into the new year. A weakening economy and a falling stock market are likely to have a major impact on Manhattan real estate, all weighing on the market this year.

Analysts say their big concern is the long-running conflict between buyers and sellers.

“The market is trending sideways and we are seeing moderate declines in some sectors,” said Jonathan Miller, CEO of valuation and market research firm Miller Samuel. “With recession and unemployment in the background, it could weaken further.”

But even as prices and sales plummet, inventories remain tight as sellers hold back listings. He had 6,523 apartments on the market at the end of the fourth quarter, up just 5% from last year, but still well below the historical average of about 8,000, according to the report. Analysts say prices are unlikely to fall enough to lure back many buyers waiting for discounts unless inventories rise significantly. Serhant said his average discount from initial list price to sale price was 6.5%, up from 4.1% in the third quarter.

Rising interest rates have pushed more Manhattan buyers into all-cash deals, which accounted for 55% of all sales in the fourth quarter, a record high, Miller said.

As with much of the recovery, the high-end and luxury segments remain strongest. Median luxury condo sales prices (defined as the top 10% of the market) rose 4% in the fourth quarter, while the market across Manhattan fell. The median price of luxury apartments is up 21% compared to 2019, twice as high as that of the broader market.

Outlook for 2023

A pipeline of ongoing or recently signed deals suggests a slow first quarter. Brown Harris Stevens said he only signed 2,312 contracts in the fourth quarter, down 43% from last year. The quarter was the worst for new contracts signed in the last decade, according to Serhant’s report.

According to Brown-Harris-Stevens, “The contracts signed are a more timely indicator of demand, marking one of the slowest exits since 2008.

But brokers remain optimistic, predicting upside surprises in 2023 as interest rates stabilize and buyers find opportunities in a more bearish market.Douglas Elliman’s Eklund Gomes Team co-founder John Gomes said December was “burning” with the holiday frenzy.

“It really caught us off guard,” he said. “Things really took a turn for the better in December.”

Gomez said the $20 million buyer for the Greenwich Village townhouse wasn’t yet on the market. He said a real estate investor had made offers for four separate apartments in a new development that “looks acceptable today.”

Compass’s Ian Slater said there was a big “split” in the market in August and September, with a wide gap between buyers and sellers, and the market started to weaken. “Buyers are now embracing interest rates as the new normal and are feeling more comfortable buying, or at least making sure that prices have not fallen.”

Gomez said one reason for the surge in activity in December was that foreign buyers began returning to the city in December. Brokers said buyers from the Middle East and China returned in December as the dollar weakened slightly and travel restrictions were lifted around the world.

Buyers are also using cash to avoid rising interest rates and take advantage of lower prices, brokers said. Also, developers who have built new apartments on the market are cutting prices to dispose of unsold apartments.

“Developers are pragmatic and concessions on pricing and closing costs,” he said. “I am optimistic about next year.”

https://www.cnbc.com/2023/01/04/manhattan-apartment-sales-plunge-q4-brokers-fear-frozen-market.html Manhattan Condo Sales Plunge in Q4, Brokers Fear Market Freeze

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