2023 Review
last year was a tough year for the Manhattan real estate market. High mortgage rates, recession fears, financial market turmoil, and world events weakened market confidence to drive sales, inventory, and prices lower. But the year ended with several signs of stabilization. In the Fourth Quarter, sales and inventory moderated versus the Fourth Quarter of 2022 and even improved for parts of the market; inflation cooled monthly without a major downturn, and mortgage rates began to decrease. Heading into 2024, some of last year’s challenges remain, but hopefully, with positive economic factors and optimism about interest rates, sales volume, and prices will improve in 2024.
Interest Rates: The high cost of borrowing money last year was by far the biggest hurdle for both buyers and sellers and the market in general. The Fed raised rates 11 times from March of 2022 to July of 2023 to bring inflation down. Fixed-rate mortgage interest rates were as high as 8% last year, the highest in 20 years. Many buyers decided to hold off on purchasing a new home and many sellers were unwilling to lower prices to be competitive or swap out their comfortable low rates on their current homes to purchase at a much higher rate. Yet, in December of 2023, the 30-year fixed rate mortgage fell below 7%, the lowest rate since August of 2022. In its final meeting of the year in mid-December, the Fed signaled at least 3 rate cuts in 2024, which augurs well for residential real estate.
Inventory: Buyers who were ready to purchase with or without financing last year faced lower available inventory, down 15% from 2022. Those buyers who did find a home that they liked took advantage of lower prices and often benefitted from more room in negotiability. That said, in certain market segments where inventory was very low, sales prices were stronger.
Stock Market: In stark contrast to 2022, where the stock market lost value significantly but was still buoyed by lower rates in the first half of the year, the stock markets soared in 2023, hitting record highs, while interest rates were higher than most can remember.
Foreign Buyers: Virtually non-existent in the post-pandemic years of 2021 and 2022, foreign buyers (according to the Real Deal) made up nearly a third of NYC investors last year, the highest it’s been since 2019, which might be attributed to lower pricing, higher rental pricing, and the high cost of financing for domestic buyers. Foreign buyers are less affected by interest rates because many purchase with cash and are using these purchases as investments.
Complexity of the Market: Most importantly and commonly overlooked, consumer confidence was way down in 2023, and the market felt different and was not as robust, which made for a challenging time for buyers, sellers, and brokers. Sales volume was lower, and time on the market increased. That said, while the sales pace was not as slow as it felt, the contract process and due diligence periods were much slower than in prior years. This fits in with past market downturns: when the market is challenging the transaction process can be fraught with issues. Deals were more complex and fell apart more easily, buyers and sellers were less negotiable in terms, price negotiability was higher, and days on the market were higher in many segments of the market. Most brokers were lamenting that anything that could go wrong would go wrong during the difficult due diligence phase leading up to a fully signed contract. There were practical delays, but others were based on fear and nervousness on the part of both parties. Additionally, there were new changes specifically in Manhattan, that created delays in the process. (See explanation below under ‘Buyers and Sellers: Complexities in Dealmaking in this Market’) However, properly priced homes sold relatively quickly at or near ask, and some with bidding wars.
Submarket Specifics: The market in Manhattan is comprised of many different submarkets and it can be difficult to generalize as each sub-market can have a life of its own. Some segments sold better than others last year, but one common theme is that if a property was priced well and consistent with the market conditions, it sold higher and faster. The submarkets consist of individual sizes and types of apartments or houses, neighborhoods, and various price points. Often, there is a flurry of activity 2 Deanna Kory - 212.937.7011 - www.deannakory.com - [email protected] in one segment, while another market segment is quiet. One easily defined pair of discrepancies in the market is between prewar co-ops vs. new development condos in the 3+ bedroom range. In most cases, the condos won out! Market segment variance is not as apparent if the market is strong, and sales are brisk. As the saying goes: “The rising tide lifts all boats.“
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Complexity of the Market: Most importantly and commonly overlooked, consumer confidence was way down in 2023, and the market felt different and was not as robust, which made for a challenging time for buyers, sellers, and brokers. Sales volume was lower, and time on the market increased. That said, while the sales pace was not as slow as it felt, the contract process and due diligence periods were much slower than in prior years. This fits in with past market downturns: when the market is challenging the transaction process can be fraught with issues. Deals were more complex and fell apart more easily, buyers and sellers were less negotiable in terms, price negotiability was higher, and days on the market were higher in many segments of the market. Most brokers were lamenting that anything that could go wrong would go wrong during the difficult due diligence phase leading up to a fully signed contract. There were practical delays, but others were based on fear and nervousness on the part of both parties. Additionally, there were new changes specifically in Manhattan, that created delays in the process. (See explanation below under ‘Buyers and Sellers: Complexities in Dealmaking in this Market’) However, properly priced homes sold relatively quickly at or near ask, and some with bidding wars.
Submarket Specifics: The market in Manhattan is comprised of many different submarkets and it can be difficult to generalize as each sub-market can have a life of its own. Some segments sold better than others last year, but one common theme is that if a property was priced well and consistent with the market conditions, it sold higher and faster. The submarkets consist of individual sizes and types of apartments or houses, neighborhoods, and various price points. Often, there is a flurry of activity 2 Deanna Kory - 212.937.7011 - www.deannakory.com - [email protected] in one segment, while another market segment is quiet. One easily defined pair of discrepancies in the market is between prewar co-ops vs. new development condos in the 3+ bedroom range. In most cases, the condos won out! Market segment variance is not as apparent if the market is strong, and sales are brisk. As the saying goes: “The rising tide lifts all boats.“
Click here to download the report.
