By Quentin Fottrell
A falling market and high prices are a double-edged sword in New York and across the country
First, the good news.
The median sale price of residential properties sold in Manhattan hit a record high in the second quarter, up 10.6% a year to $1.25 million, while the average sale price hit its third-highest ever registered, according to a report by real estate expert Miller Samuel Inc. and real estate brokerage Douglas Elliman said this week.
“The number of sales increased to the highest total for a second quarter since 2007,” the report said. “Cash buyers’ market share rose to the third highest tracked, rebounding from the low recorded five quarters ago.”
Now for the bad news: While median co-op and condo sales hit an all-time high in the second quarter, co-op and condo sales contracts fell nearly 30% on the year in June to reach 1,318. “This suggests that the current quarter represents a peak period of closed selling activity,” the report said. “Bidding wars market share fell from the previous quarter’s four-year high of 9.3% to 8.5%, with the average amount of premium paid falling to 4% from 5.3% on the same period.”
Frederick Warburg Peters, the chairman of Coldwell Banker Warburg, issued a gloomier outlook for the Manhattan real estate market in his own second-quarter market report, released this week. “Throughout the second quarter, this slowdown accelerated: fewer contracts signed, fewer bidding wars, more price reductions and a gradual increase in available inventory,” he writes. “The gradual downturn in the sales market is manifesting in all boroughs and at all price points across the city.”
A falling market and high prices are a double-edged sword. Higher interest rates, fears of a recession, and people dipping into their savings at a time when inflation is at a 40-year high are keeping everyone from buying a home, even if they spend more of their income on rent
The median monthly rent in New York is $3,300, 53% higher than the national median of $2,155. Indeed, a real estate agent recently told MarketWatch that the New York rental market is “crazy.”
“Dealing volume is slowing down in Manhattan because it’s really hard to buy a home there, even at the bottom of the market,” said Jeff Tucker, senior economist at Zillow. “The volume of contracts signed for Manhattan’s most expensive homes continues to increase month over month, but the reverse is true for the most affordable homes. Existing homeowners who may want to move – especially if they have refinanced in the past two years – consider mortgage rates that start with 5 instead of 2. This puts pressure on both buyers and sellers.”
On this last point, Manhattan is a microcosm of a national phenomenon. National affordability has hit its lowest level since 2007, Mark Fleming, chief economist at title insurance company First American Financial Corporation, wrote in a recent note. “For homebuyers, there are few options to mitigate the loss of affordability caused by rising mortgage rates and home prices,” he said. “One way to compensate for the decline in affordability is to increase household income by an equivalent, if not greater, amount.”
Yet rising real estate prices have also forced millions of people who do not earn salaries in Manhattan out of the housing market. The national median home price is $349,816, according to Zillow — lean by Manhattan standards, but pricey considering prices have risen nearly 21% over the past year, far outpacing inflation salary of about 5% per year. To put these national real estate prices into context, the average annual salary in the United States hovers at $53,490.
“Spiking mortgage interest rates should accelerate market rebalancing by reducing demand both in New York and across the country,” Tucker said. “Monthly mortgage payments continue to rise, so competition for homes is easing as some buyers are shut out of certain markets. Across the country, pending sales continue to increase month over month, but new listings are growing faster, causing active listing inventory to climb.”
Another silver lining: “May is one of the busiest months for home buying, so although pending sales are increasing, they are now down from this time last year,” said added Tucker. “The market is cooling because supply is starting to outpace demand – the start of a welcome change for buyers at the moment. So far, however, it feels more like a silver lining of how the Lowest affordability in 15 years lessens competition. While shoppers will face less competition, their purchasing power has diminished.”
Of course, Manhattan is a single market and has a “completely different” price and homeownership rate (24%, vs. 65% nationally) from the rest of the country, said Danielle Hale, an economist in chief at Realtor.com, at MarketWatch. . The city emptied out at the start of the pandemic, offering some value to potential buyers, but recovered ground last year.
Sales volatility is significantly lower in the New York metro area than in other metro markets, according to Hale’s research, but price volatility is actually slightly higher than in the average metro – with the exception of hot markets like Miami and Las Vegas. “The price volatility is somewhat surprising and could stem from the size of the metropolitan area, which gives a wide range of individual prices and therefore means that the median price could be more subject to changes in the mix of what is for sale. .”
In New York, however, “buyers are paying particular attention to economic and financial market conditions,” she added, “and that could be indicative of what we’re seeing in the rest of the country.”
(END) Dow Jones Newswire
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