Manhattan co-op and condo deals increase for the first time in two years
- The second quarter saw a 'burst' of sales with a 12.2 percent annual jump according to the Elliman Report
- Despite elevated mortgage rates, buyers using financing increased at a greater rate than all-cash buyers
Instead of waiting on the sidelines, more buyers are reconciling themselves to high prices and high mortgage rates said Jonathan Miller of Miller Samuel.
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Borrowers had a stronger presence in Manhattan’s second quarter sales market. For the first time in two years, the number of Manhattan co-op and condo buyers using financing increased at a greater rate than all-cash buyers, according to the latest edition of the Elliman Report for Manhattan co-ops and condos
The shift was part of a “burst” of sales for Manhattan in the second quarter. Sales rebounded annually for the first time in two years, increasing by 12.2 over the second quarter of 2023, the Elliman Report said.
Instead of waiting on the sidelines, more buyers are reconciling themselves to high prices and high mortgage rates, according to Jonathan Miller, president and CEO of appraisal firm Miller Samuel and author of the report. If they can afford to make a move, they are doing so, as he said.
All-cash deals have dominated the market because of high mortgage rates, which have kept buyers who needed financing and sellers wedded to their low interest rates on the sidelines. The share of cash deals has been above 60 percent for four quarters and represented 63.3 percent of total transactions in the second quarter, Miller said.
However, in the second quarter, the number of deals involving buyers who need a mortgage increased 15.1 percent year over year while all cash deals grew 10.6 percent, Miller said.
Not waiting for rate cuts
Miller noted that the number of mortgage purchases increased even though “mortgage rates didn’t go anywhere” in the second quarter. They remain elevated; the dip seen at the end of the quarter occurred too late to be impactful.
Most economists expect a single interest rate cut in September (a departure from the multiple cuts previously signaled by the Federal Reserve). Mortgage rates, which are tied to interest rates, would be expected to fall then.
Increase in listings boosts sales
The number of Manhattan listings grew annually for the first time in five quarters, increasing by 4.2 percent to 8,044, which is well above the average number of listings for the second quarter over the past decade, the report said.
Even though the median sales price for co-ops and condos slipped by a mere 1.5 percent to $1,181,679, it was the second-highest median sales price in two years.
‘Continuing to stabilize’
Coury Napier, director of research at SERHANT, described the Manhattan sales market as “continuing to stabilize” in his second quarter sales report.
“We are beginning to experience a shift in the market that is benefiting potential buyers out there. While prices are still elevated, they are beginning to show signs of cooling,” he wrote.
“The best news for the marketplace may be the rise in inventory and new listings,” Napier said. “Sellers got off the sidelines for the spring market and are continuing to get more comfortable with parting with their Covid rates.”
But still catching up to pre-pandemic levels
Manhattan apartment closings were still about 20 percent lower than the pre-Covid second quarter average, noted Bess Freeman, CEO of Brown Harris Stevens, in her firm’s Manhattan market report.
“Even with a healthy level of apartments for sale, persistently high mortgage rates continue to keep many buyers on the sidelines,” she said.
Prices must be ‘exactly calibrated’
The newly “awakened” Manhattan market is extremely price sensitive, said Frederick Warburg Peters, president emeritus of Coldwell Banker Warburg, in his Manhattan market report.
“While the sales market has definitely improved since the first quarter, it remains sluggish unless prices are exactly calibrated to reflect today’s somewhat reduced values and unless buyers trading one apartment for another can bring themselves to sacrifice their 2.75 percent mortgages for new ones at 6.75 percent!” he wrote.
A summer slowdown
BOND New York’s second quarter Manhattan market report predicts listings to diminish during the summer months.
“We expect to see the supply levels continue to dwindle and not much in the way of new inventory until early fall when we enter another selling season. This doesn’t mean that there aren’t opportunities for buyers. If anything, there may be better deals thanks to less competition," the report said.
Expect more competition when rates finally drop
Buyers who are still on the sidelines can expect more competition in the future, said Pamela Liebman, president and CEO of Corcoran, in her firm’s Manhattan market report. She pointed to slight increases in both supply and demand compared to last year, and attractive prices that are drawing in buyers.
“While it's too soon to declare a full recovery, these positive trends are encouraging and when rates eventually drop, I expect eager buyers will jump back into the market,” Liebman said.
Eyes on the election in the fall
“Buyers are starting to pay attention to the presidential election, which always sets a freeze over our markets,” noted Ian Slater, a broker at Compass. The firm also released a Manhattan sales market report.
“There is too much uncertainty and the buyer pool is expecting too many discounts to sustain pricing. After the election, I expect the market to trough out [hit bottom] and prices to begin to rise again, particularly if there is a meaningful drop in interest rates,” Slater said.
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