Inventory is up. Mortgage rates are going up (and going up). Do these indicators herald a slowdown in New York City’s hot real estate market? Will the uncertainty surrounding the ongoing war in Ukraine freeze homebuyers in their tracks? How have buyers and sellers fared during the first quarter of 2022?
Sales remained buoyant during the first quarter, although transactions in the luxury condo market have slowed since late last year. Olshan Luxury Market Report, which tracks weekly contracts signed for $4 million and above, has shown fewer sales above $15 million during February and March. And each week, among the ten contracts with the highest price, the cooperatives represent one or at most two of the offers. The ultra-luxury buyer, spending $10 million or more, wants a condo, preferably new construction and no hassles. Most listed co-ops with prices over $10 million sell slowly, often taking a year or more and several price cuts before finding a buyer.
The market has remained particularly strong in its appetite for a) smaller apartments, b) those larger units with high square footage at reasonable prices, and c) just about anything in hotter, more limited-supply areas like Greenwich Village and Park Slope. Some examples: A 4-bedroom post-war co-op in the 1970s East recently opened with a price tag of just under $3 million; received a full price offer within 24 hours. An elegant 5-bedroom apartment in a prestigious post-war building in the West Village near Fifth Avenue also sold in one day for just under $4 million. And a tiny two-bedroom walk-up fourth floor in Boerum Hill, less than 1,000 square feet and less than $1 million, had so many open house visitors that the broker had to end the exhibit early. Received 11 offers!
After seeing decreasing inventory every month since last summer, March has finally seen a net gain in available inventory. Thus, for the first time in a year, the new listings in the market have surpassed the positions under contract or eliminated from the “Active” category. This is a significant change as the market moves into spring. Listings typically increase in April, September, and January, but over the past year, the market has seen disappointing gains in available properties, leading to the current imbalance between supply and demand. Perhaps as the second quarter begins, the market will see adequate supply, allowing buyers to find the homes they want to buy before interest rates rise again. The Federal Reserve has indicated that, in its bid to rein in inflation, it will likely raise rates at each of its subsequent meetings throughout 2022.
Most indicators suggest that while sales and rental numbers have cooled off from record numbers in the first quarter of 2021, housing markets across the city remain strong. The rental market, which had not fully regained its footing by this time last year, came back strong during the second half of the year; Once again, tenants, rather than landlords, are expected to pay a full 15% commission at lease signing, and properties everywhere receive competitive offers within a week or two of listing. While the high-end rental market certainly takes more time and effort, $10,000, $20,000, even $30,000 per month rentals are once again rare and sought after, especially in the prime neighborhoods of Brooklyn, Manhattan, and Queens.
(A side note on interest rates: From the early to mid-1980s, mortgage rates fluctuated between 14% and 16%, dropping to around 10% for the rest of that decade. It wasn’t until 1993 that rates finally fell below 6%. But since the 2008 recession, an entire generation has come of age without experiencing mortgage interest rates as high as 4%. Therefore, this exceptionally anomalous period of the last 15 years leads today’s real estate buyers to fear interest rates of 4% or 4.5% that would have been considered very favorable at almost any other time in the era. after World War II.)
It seems likely that the second quarter will be just as busy as the first. With an increase in inventory likely as April ushers in the spring market and buyers who, despite the uncertainties inherent in the present moment, want to take advantage of current interest rates to meet their post-pandemic needs and wants, the stage is set for a busy few months. It may be less overheated than it was this time last year, but the New York market is still a behemoth.