The Manhattan residential real estate market saw a decline in prices last quarter as it continued to adjust from the record highs of the pandemic-era housing boom. The Federal Reserve's campaign of aggressive rate hikes in the second half of 2022 triggered a sharp decline in buyer demand, which persisted into this year. Consequently, sales volume fell by over 35% from a year ago, leading to a decline in both the average and median sale price by 5% and 10% respectively. The market also faced additional challenges such as recent bank failures and continued economic uncertainty that kept potential buyers at bay until recently.
Buyer demand surged by 50% last month compared to February, bringing buyer activity at the end of the quarter to the same level as May of last year, before the Fed's aggressive interest rate hikes. The sales market has been most active below the $2 million mark, as tenants look to buy amid record-high rents. Meanwhile, the lower end of the luxury market ($4-10M) has also picked up, with weekly signed contracts doubling from January to March. Properties in contract are ones that have been priced to reflect current market conditions while overpriced properties continue to languish on the market.
Despite low sales volume, inventory remains tight as many sellers with ultra-low interest rates hesitate to put their homes on the market until conditions improve. Sellers who have listed their homes are willing to negotiate on price and terms but are not slashing prices much to the chagrin of buyers expecting hefty discounts. Savvy buyers will recognize opportunities in the current market and take advantage of seller negotiability and less buyer competition. Looking ahead, we can expect market conditions to improve this quarter as more buyers enter the market.
