Manhattan home prices hit a record while sales frenzy winds down

Manhattan home sales showed continued strength in the second quarter, though there are clear signs that fears of a recession are slowing down the market.

Purchases of condos and co-ops closed at a median of $1.25 million, a record high, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Wednesday.  The 3,834 transactions — a 12% increase from a year earlier — were the most for any second quarter since 2007. But deals going into contract fell throughout the period, signaling a decrease in buyer demand.

“This is a quick pivot from an overachieving market to a market that’s being challenged by an unprecedented amount of uncertainty,” said Jonathan Miller, president of Miller Samuel. While some brokers and agents are depicting the shift as a return to pre-pandemic market dynamics, Miller said that to him, “this is not a normalization.”

Manhattan’s post-lockdown buying surge is cooling down fast. The drop in new contracts began in April, and in June, deals were down 29% year over year, to 932 from from 1,318. Miller pointed to “the spike in interest rates, inflation, economic uncertainty, the war in Ukraine” as parts of the “whole smorgasbord of things the consumer has been grappling with” that are influencing residential sales.

Among closed purchases, there was strength across the market in the second quarter, with the median co-op price setting a record at $865,000, and the median for condos hitting an all-time high at just below $1.9 million, according to Miller’s analysis. Units spent 86 days on the market before finding buyers, down from 137 days in the first quarter. Even with listings moving more quickly, inventory jumped 15% from the first quarter to 7,968 active listings at the end of June.

With mortgage rates rising, the share of sales being conducted in cash reached 53% in the second quarter, the third-highest proportion on record, Miller said.

“It’s a confusing market,” said Bess Freedman, chief executive officer of brokerage Brown Harris Stevens. “New business has slowed down. Agents say interest in their property has lessened, less people at open houses, less offers coming in.”

Still, Freedman says that her firm’s contracts at the end of June were only slightly below the year-ago levels.

“Considering all the stuff that’s going on, the market is still doing pretty well,” she said.

Closings take place weeks or months after a contract signing, so there is a lag between data on completed deals and the conditions that current buyers and sellers are facing. And not every reported sale results in a closing.

“Contracts are the best real-time indicator of market performance,” said Garrett Derderian, director of market intelligence at brokerage Serhant. “The third quarter will be more bleak” because it will reflect the decline in contracts over the past three months. 

But a rebound could be ahead if there’s more certainty around a range of factors influencing market sentiment, including the 2022 U.S. elections, the Federal Reserve’s interest rate hikes and stock volatility, Derderian said. Though higher mortgage costs are currently deterring some buyers, once they stabilize they “will start to become baked into the market,” he said.