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Manhattan condo gross sales fell by 29% within the fourth quarter, sparking fears of a frozen market during which consumers and sellers keep on the sidelines because of financial and fee fears.
There have been 2,546 gross sales within the quarter, down from 3,560 final yr, in line with a report from Douglas Elliman and Miller Samuel. The decline was the biggest because the third quarter of 2020, in the course of the depths of the pandemic.
Prices additionally declined for the primary time since early 2020, with the median value down 5.5%.
The declines in each gross sales and costs mark the top of the roaring comeback in Manhattan actual property after the worst days of the pandemic and lift fears of constant weak spot into the brand new yr. Rising rates of interest, a weaker financial system and a falling inventory market, which has an outsized affect on Manhattan actual property, are all more likely to weigh in the marketplace this yr.
Analysts say their huge fear is a chronic standoff between consumers and sellers — with sellers unwilling to listing amidst falling costs and consumers pausing their searches till costs fall additional.
“I could see the market moving sideways, with some modest declines in some sectors,” stated Jonathan Miller, CEO of Miller Samuel, the appraisal and market analysis agency. “And it could weaken further if there is the backdrop of recession and job loss.”
Even as costs and gross sales drop, nevertheless, stock stays tight as sellers maintain off on listings. There have been 6,523 flats in the marketplace on the finish of the fourth quarter, in line with the report, up solely 5% from final yr however nonetheless effectively beneath the historic common of round 8,000. Without a big improve in stock, analysts say costs are unlikely to fall sufficient to lure again many consumers ready for reductions. The common low cost from preliminary listing value to gross sales value was 6.5%, up from 4.1% within the third quarter, in line with Serhant.
Rising rates of interest have additionally moved extra Manhattan consumers into all-cash offers, which accounted for 55% of all gross sales within the fourth quarter, the best on document, in line with Miller.
As with a lot of the restoration, the high-end and luxurious phase stays the strongest. Median sale costs for luxurious flats — outlined as the highest 10% of the market — elevated 4% within the fourth quarter, in comparison with a decline within the broader Manhattan market. Median costs for luxurious flats are up 21% in comparison with 2019, twice the rise because the broader market.
The outlook for 2023
The pipeline of offers within the works or lately signed suggests a sluggish first quarter. There have been solely 2,312 contracts signed within the fourth quarter, down 43% over final yr, in line with Brown Harris Stevens. The quarter was the worst for brand new contracts signed up to now decade, in line with a report from Serhant.
“Contracts signed are a timelier indicator of demand and registered one of the slowest finishes to any year since 2008,” in line with Brown Harris Stevens.
Brokers, nevertheless, say they continue to be optimistic and plenty of are predicting an upside shock in 2023, as charges stabilize and consumers discover alternatives in a softer market. John Gomes, co-founder of the Eklund Gomes crew at Douglas Elliman, stated December was “on fire” with a frenzy of year-end offers.
“It really caught us off guard,” he stated. “Things really turned around in December.”
Gomes stated one purchaser paid $20 million for a townhouse in Greenwich Village that wasn’t even in the marketplace. He stated an actual property investor made provides for 4 separate flats in new developments “that look like they will be accepted today.”
Ian Slater at Compass stated there was an enormous “disjoint” available in the market in August and September, with a large divide between consumers and sellers and the market began to weaken. “Now I am seeing buyers accept interest rates as the new normal and feel more comfortable purchasing — or at a minimum that prices aren’t falling.”
Gomes stated one cause for the December burst of exercise is international consumers, who began to return to the town in December. With the greenback weakening barely and journey restrictions lifting all over the world, brokers say consumers from the Middle East and China returned in December.
Brokers say consumers are additionally utilizing money to keep away from the upper rates of interest and benefiting from decrease costs. And builders with new condo buildings in the marketplace are reducing costs to unload unsold flats.
“Developers are being realistic, they’re making concessions on price and closing costs,” he stated. “I feel optimistic about the coming year.”