Manhattan's real estate market is experiencing a notable shift, with falling apartment prices and rising inventory marking a transition to a buyer's market. In the second quarter of 2024, the average sales price of Manhattan apartments decreased by 3%, settling just above $2 million, according to reports from Douglas Elliman and Miller Samuel. The median price saw a 2% drop, reaching $1.2 million, while luxury apartment prices declined for the first time in over a year.
This price dip is driven by an increase in available apartments, which are also taking longer to sell. The number of apartments for sale in Manhattan has exceeded 8,000, surpassing the 10-year average of around 7,000, as stated by Jonathan Miller, CEO of Miller Samuel. Currently, Manhattan has a 9.8-month supply of apartments, a figure that Brown Harris Stevens indicates signifies an oversupply and a buyer's market condition.
The scenario in Manhattan contrasts with the broader national real estate landscape, where limited supply continues to keep prices high. Experts suggest that the strong post-Covid prices in Manhattan were unsustainable, leading to a capitulation from both buyers and sellers in the face of higher interest rates. "The buyers and sellers resolve is weakening," Miller noted. "At a certain point, they can only wait so long before they feel like they have to make a move."
As the gap between buyer and seller expectations narrows, the number of closed deals has increased. The second quarter recorded 2,609 sales, a 12% rise from the previous year, marking the first sales rebound in two years. "As the second quarter began, New York's real estate market awakened from the doldrums in which it had languished for the first quarter of 2024. Deals in all price categories began to emerge," commented Frederick Warburg Peters, President Emeritus of Coldwell Banker Warburg.
High rental prices in Manhattan continue to drive some potential buyers into the sales market. With the average apartment rental price in May exceeding $5,100 a month and expected to rise further in late summer, many renters are opting to purchase properties, hoping for interest rates to decrease by the end of 2024 or early 2025. "If people were sitting on the fence, the high rents maybe helped push them into the sales market," Miller added.
Interestingly, mortgage rates have a muted effect on Manhattan real estate compared to the rest of the country since most transactions are made in cash. In the second quarter, 62% of Manhattan deals were all-cash transactions. Despite the overall price decline, the high-end segment of the market appears particularly vulnerable. The median sale price in the luxury segment-the top 10% of the market-fell by 11% in the second quarter, with listing inventory of luxury apartments increasing by 22%.
"This weakness could be the beginning of a trend or just a one-off," Miller speculated regarding the high-end market. "We will have to see what happens in the second half."
Manhattan Home Sales Unexpectedly Rise Despite High Rates
In a surprising turn, Manhattan home sales have risen for the first time in two years, driven by buyers who decided not to wait for interest rates to drop. Co-op and condo closings in Manhattan increased by 12.2% in the three months ending in June compared to the same period in 2023, according to Miller Samuel Inc. and Douglas Elliman Real Estate. Although the median price of $1.18 million slightly dipped from the previous year, it remains near a record high since rates soared in mid-2022.
"Buyers aren't willing to wait anymore even though rates haven't cooperated," stated Jonathan Miller, president of Miller Samuel. The uptick in sales, which Miller described as "unexpected," is attributed to various factors including family needs and long-term planning initiated when experts predicted a rate cut.
Nationally, the real estate market has been largely stagnant for over a year due to high mortgage rates, which have constrained new inventory and kept prices elevated. The Manhattan data suggests buyers are viewing this period as an opportune time to purchase before potential Federal Reserve rate cuts increase demand and prices.
In the second quarter, sales with mortgages rose by 15.1% from the previous year, compared to a 10.6% increase in cash sales. About 27% of deals in this period followed at least one price drop, a decrease from roughly 35% in the prior four quarters, indicating a market adjusting to current conditions.
However, this increase in market activity may be short-lived without further rate cuts. Contracts signed in June were down nearly 14% from the same month last year, and the number of homes listed decreased by 10%.