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Manhattan real estate sales fell 38 percent annually in the first quarter of 2023 as buyers and sellers contended with high prices and mortgage rates.
Total sales volume fell to $4.4 billion during the first three months of the year with 2,242 apartments and townhomes sold, compared to 2,546 during the first quarter of 2022, according to a report from Douglas Elliman and Miller Samuel.
The average sale price fell 5 percent to $1.95 million, while the median sale price fell 10 percent to 1.075 million according to the report.
The drop in sales and prices seen during the first quarter comes after the fourth quarter shouldered a 29 percent year-over-year drop in sales, illustrating how high mortgage rates have heightened the already usually slow winter season for home sales, and how the market is continuing its transition out of the boom years of 2021 and early 2022.
“The market continues to transition out of the pandemic-era boom a year ago with lower sales and modest inventory growth as mortgage rates are more than double last year’s,” Douglas Elliman and Miller Samuel wrote in the report.
However, according to Compass’s Manhattan Q1 report, the first quarter also saw contract activity in Manhattan increase 14.5 percent quarter over quarter, suggesting that the market is due for a spring reawakening.
“Contract activity picked up 14.5 percent quarter over quarter as buyers and sellers increasingly decided to move on with their lives after largely waiting on the sidelines during the second half of 2022, accepting the reality of higher interest rates, sustained economic uncertainty, and ongoing geopolitical challenges,” said Elizabeth Ann Stribling-Kivlan, senior managing director at Compass.
As a response to 20-year high mortgage rates, cash deals hit a new record for the second-straight quarter, with the market share of cash buyers reaching 56.8 percent according to Miller Samuel. At the higher end of the market, three quarter of all sales over $5 million were done in cash.
Many of the buyers active in the Manhattan market are extremely wealthy, making them largely unaffected by mortgage rates and overwhelmingly likely to do business in cash.
“These buyers are less affected by rate hikes. They were sick of waiting and could still afford to purchase,” Rachel Glazer of Compass said. “Moreover, buyers tend to be ultra-high net worth, especially towards the higher end of the $10 million range. Most people buying a $10M are worth multiples of that.”
As other buyers become more accustomed to mortgage rates around 6 percent and the federal reserve eases its interest rate raises in the face of a banking crisis, experts predicted that the market will continue to come back to life throughout the spring and summer.
“Especially for younger buyers, the artificially low rates which have predominated since the 2008 recession seem the norm,” Coldwell Banker Warburg President Frederick Warburg Peters wrote in a quarterly report. “In fact a mortgage at five or six percent remains low by historical standards. The gradual acceptance by. buyers of this reality is a factor in allowing the real estate market to begin to recover.: