During Macroeconomic Headwinds,
Manhattan is Holding its Own!
While many predict housing prices will drop 20% to 30% nationwide, Manhattan and the surrounding New York City markets are holding their own. That’s mainly because, during the COVID rebound year – while the rest of that country was seeing increases in prices almost month over month – Manhattan and the surrounding boroughs, particularly prime areas of Brooklyn, were seeing high transaction rates, but pricing really didn’t go much higher than 2018/2019 levels. This could prove to be a lifesaver as the housing market unfolds and the overall real estate markets come down to more realistic pricing levels.
Manhattan and Brooklyn were in the throes of the COVID rebound in 2021 and half of 2022. Just like the rest of the industry, it all came to a screeching halt in June of this year, due largely to rising interest rates and a downturn in the stock market. Things have somewhat recovered and adjusted since then, and the market continues to be strong when put against prior “normal“ real estate years. For instance, 163 apartments were put into contract the third week in September. That’s pretty much on par with the same week in September 2019. The saving grace for Manhattan and Brooklyn is that sellers weren’t really able to push pricing up in 2021-2022, even though transactions were at a record pace. This means the downturn or recovery months to follow should be relatively easy on prices. Yes, there will be some adjustments, but not the 20% to 30% many pundits are expecting throughout the country.
Of course, time will tell, but Manhattan and prime Brooklyn have the advantage of a very wealthy clientele, buyers and sellers alike. There are many more cash buyers in New York City: roughly 30% to 40% of all transactions are cash in any given price range and above 50% in prime Manhattan markets. If there is even a slight price adjustment, buyers generally come out of the woodwork to take advantage of that discount. Plus, the real estate market in New York City has a backstop called the rental market. For the most part, these two markets swing back and forth from one another. When the rental market gets too hot, renters tend to return to the sales market and vice versa. Right now, rental prices are 30% higher than pre-COVID levels, which means we are seeing additional buyers in the sales marketplace. These are people who were initially interested in renting but decided that, now that rents have exceeded mortgage plus HOA fees, they’ll dip back into the sales market despite higher interest rates.
Of course, no one has a crystal ball or knows exactly what the three, six or nine months will bring. But Manhattan has been able to weather most major housing market drops in the past. This time should be no different.
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