Elegran Manhattan Market Update: October 2022

Overall Manhattan Market Update: October 2022

Contracts dipped in September which — historically and intuitively — is to be expected since buyers have not yet been afforded the time to visit, vet and verbalize offers on the large volume of inventory that comes to market during the month after a seasonally slow summer. September is usually the slowest month of the year in terms of contract volume.

More important; however, is that for the past 4-months, Manhattan’s contract volume has been at or very near parity with the historical average, which is a victorious headline given that ^GSPC (the S&P 500 index) ended September down 25% YTD and mortgage rates ended September higher by 100% YTD. These intense headwinds have contributed to the slowing of the Manhattan market (compared to September 2020 — March 2022) and the market today is on par with the historical season average.

With every passing challenge, the hue of Manhattan’s blue chip status on the world stage continues to grow deeper and more vibrant. We’ve previously published vis-a-vis NYC real estate’s incredible resilience — after the 9/11 tragedy; after the 2007–2009 stock crash; after Hurricane Sandy and after COVID. Manhattan’s bona fides as a low volatility hard asset is incontestable.

Manhattan Supply

Total supply increased 15.5% to 7,440 units for sale, due in large part to the 1,992 new listings that joined the active market during September. However, Manhattan supply is still well shy of the high reached in H2–2020 as uncertainty prompted increased listing activity. If history serves as a guide, we can expect supply to increase again in October. Note: “Total Supply” refers to the amount of inventory on the market at a given time. “New Supply” or “New-to-Market” refers to the amount of new inventory that came on the market in a specific time period.

Manhattan Buyer Activity

As measured by signed contracts, purchasing was in line with the historical average yet significantly off last September’s tally.

However, this is to be expected — and welcomed — since 2021 and the majority of H1–2022 witnessed a record number of residential reservations due to both the manifestation of COVID-driven pent-up demand and the expedition of future demand driven by rising mortgage rates. The continuation of inflated absorption would have ultimately become unhealthy and adversely affected future markets. Since June (PLEASE REFER TO CHART BELOW), contract volume has been at or very near parity with the historical average, a strong signal that Manhattan’s market was in fact not overbought and that the market corrected itself (i.e., reverted to the mean) in time and in avoidance of such adverse effects.

Manhattan Monthly Contract Activity

Manhattan Market Pulse

Currently at 0.39, the ratio of demand (as measured by pending sales) to supply, decreased 25% from August.

The graph on the following page tracks the monthly aggregate of demand (as measured by contracts signed), supply and median price/sf. It indicates that Manhattan is firmly in the grips of a buyer’s market as stock market and mortgage rate woes have driven down demand and leveled off the run in median price/sf.

Pricing & Discounts

At $1,175,500, Manhattan median sales price has trended down slightly after hitting a short-term peak in April and May, yet is still 10% higher than this time last year. Median price per square foot, currently at $1,421, indicates a very similar trend, down slightly from Q2, yet higher Y-O-Y. Although it has risen to 3.2% over the past few months, median listing discount is still far below last year’s level.

What this means for…

Buyers:

• Manhattan is firmly in a buyer’s market due to cooling prices, far less demand and abundant supply. Remember, a buyer’s or seller’s market suggests which party feels the urgency to transact and, in the case of a buyer’s market, it is the seller who feels that urgency. Conversely, buyers have ample product, ample time and prices moving in their favor.

Sellers:

• Need to be aware that buyers are in the driver’s seat for the time being.
• Expect competition in the form of more sellers coming to market. Sellers need to carefully monitor the comps and be responsive with their asking price to stay competitive and relevant to buyers.
• Sellers who are not commanding their desired sales price should consider renting their home instead, at least for a year or two, and capitalize on the strong rental market and high rents.

Renters:

• The rental market is as competitive as ever with rents remaining stubbornly high, although there are signs that the peak of pricing has recently passed.
• Much of the new-to-market rental supply is coming from tenants who received Covid-era rent prices and are now priced out of the apartments as their renewal rents skyrocketed.
• Asking rents continue to be approximately 20% higher than in 2020 and 2021 and approximately 5% higher than in 2018 and 2019.

Investors:

• Current market conditions create an opportunity for cash-investors (who are either liquid, or able to trade out of another real estate investment) to invest in Manhattan real estate.
• Manhattan presents a more reliable and stable investment option compared to other national markets that experienced sharp price appreciation over the last 24-months, now overheated with little to no room for near-term growth.
• The strong rental market may create a price floor for sales prices, offering sellers the option to rent their home for 1–2 years if they are unable to command their desired sales price.