Manhattan residential real estate is usually highly seasonal – the summer is typically the slowest season of the year. As the temperatures cool, the market heats up ushering in an active fall and winter. Last year’s challenges upended any expectation of seasonality, and the Third Quarter numbers reflect that the summer was anything but slow this year. Buyer demand in Manhattan skyrocketed during the Third Quarter, making it the market’s best summer since 2007. Sales volume from July through September totaled over $9.5B, which was Manhattan’s highest quarterly total ever! As sales surged, supply was reduced thus shortening days on market and stabilizing prices. Better value, low interest rates, upsizing, tightening supply, and high confidence has been powering Manhattan’s comeback, putting it on track to produce one of the best years ever for Manhattan real estate.
Additionally, during the Third Quarter:
- Closings increased on a quarterly and annual basis, reaching their highest level in 14 years.
- Contracts signed, the best barometer of current market conditions, remained very strong, improving annually for the fourth consecutive quarter to over 3,500 deals.At this pace, Manhattan is on track to break the 2007 record for the number of contracts signed in a single calendar year.
- There is still a high supply of inventory for sale, but the sheer velocity of deal activity has driven the number of listings down over the past year.
September: A Good Indicator of Early Fall Momentum
In September, there were 1,011 contracts signed in Manhattan, marking a record high for both condos and co-ops. Condos led the way – doubling the number signed compared to a year ago. According to Urbandigs.com, given supply and demand, leverage has remained with buyers throughout September in many markets, even with the positive statistics overall.
- Demand for luxury properties remains robust, with sales over $5M also reaching an all-time high for September with 75 contracts signed.
- In response to the very strong demand, days on market fell on a yearly basis for the ninth consecutive month to 155 days on average, only slightly above August but down 5% versus its pre-pandemic peak of 164 in January 2020.
Not all Markets are the Same
Manhattan is made up of many different sub-markets that perform very distinctly given market demand. These unique sub-markets are defined by product type (co-ops, condos, townhouse and new development), price point, and location. In addition, a building’s reputation and/or level of amenities vastly changes a home’s desirability. Two similar properties in very different buildings or locations can be valued quite differently. While certain categories sale prices have exceeded pre-pandemic levels, the market cannot be considered fully recovered as certain sub-markets continue to struggle to regain their pre-2020 value. There have been plenty of reports lately that highlight spectacularly high sales, but these reports often fail to drill down on specific sub-markets that may or may not be as ‘newsworthy’. Sellers should not react to record sales by ambitiously pricing at 2015-2016 peak levels just yet.
- Inventory is still high with 6,850 active listings recorded in the Third Quarter, 17% over the average 3Q over the last decade, albeit the lowest in the last three years and 28% down from last year’s high of nearly 10,000 listings.
- Buyer priorities have shifted and the ability to work remotely changes buyer’s views on where to live.
- If mortgage rates increase, there may be a slowdown to the fast pace of the current market. The fear of increases is in part driving the current activity.
- Supply chain shortages and costs have made new or renovated homes even more desirable, and homes that need work less desirable.
- Negotiability percentages are at their lowest levels in four years. Multiple offer scenarios have returned to various sub-markets- this is not true across all property types. The share of multiple bid scenarios in Manhattan rose to 8.3% in the Third Quarter, the highest it has been in 3 years, but still way below the 31% record set in the 3Q 2015.
- As prices improve, buyers could back off if they feel they missed the market. Historically, pricing start to increase 9 to 12 months after sales activity improves.
Seasonality or a Change in Consumer Behavior?
It is hard to know what the future holds, but many trends spurred on by the global pandemic have remained. Buyers are still upgrading to larger homes and townhouse sales are still very high. Pieds-a-terre have also become more desirable as those who have left the city for new homes in the suburbs want to return periodically for work or perhaps to enjoy the resurgence of the city. Just recently, the US lifted travel bans from most countries which will encourage foreign buyer purchases (especially in larger condos and new developments). This year may have been atypical seasonally, but it may be time to reevaluate what motivates today’s buyer.
Advice for sellers:
We continue to maintain that pricing properly and not ambitiously will yield the best possible sales price the market will bear and, in the end and if priced properly, the result could exceed expectations. Additionally, properties that need work, are perceived as dated, or do not show well could sit on the market due to the difficulty of renovating amidst current supply chain challenges. Now, more than ever, preparing your home through staging and minor repairs to make it “move in ready” is critical. If you are considering buying or selling, we would be happy to speak with you about the best strategy and timeline to meet your goals.
Advice for buyers:
UrbanDigs.com, a highly respected source tracking and analyzing NYC residential real estate data in real time, contends there is still a window of opportunity right now for buyers because supply still outpaces demand. Their weekly video blog reviews the various categories where buyers are most likely to fare well and provides the background for their predictions. UrbanDigs most recent episode