A Glance Back And A Look Ahead

Happy New Year!

2024 started off much like 2022 and 2023 did — struggling with low transaction rates, mostly due to high mortgage interest rates. As we moved into spring, the weekly transactional rate never topped more than 240 units per week, when a typical spring market often reaches highs of 400 to 450 contract signings per week! However, last year's lower signed contract rates did remain steady throughout the year at about 200 contracts per week.

There was more trepidation than usual in our local markets leading up to the November elections. With a turbulent presidential election ahead, many anticipated a downturn in buyer activity. However, there was slight relief in August when interest rates briefly dropped to under 6%. The market then saw a steady increase in transactions through the end of the summer and deep into the fall market. As the presidential election came and went, interest rates hovered around 6% to 6.5%. At that time, many in the industry thought the real estate market would enter its typical fall slowdown into the holidays and the end of the year. However, transactional rates stayed strong compared to the past few seasons, and 2024's Q3 and Q4 saw a 30% to 35% increase in contract signings!

The luxury sector, the segment priced at $4 million and above, which many believe to be the bellwether for the rest of the market, recorded an 8.5% increase in listings going into contract compared to 2023. The upper echelon of the luxury market price at $10 million and above, often called the trophy listing sector, saw a 4% year-over-year increase in deals, with 278 contracts signed last year. As a matter of fact, 2024 ranked as the second-best year since 2006, when monitoring of the trophy listing segment began. Interestingly, the No. 1 year for trophy listings was 2021, the pandemic rebound year, when almost 400 trophy properties were listed and sold. Without question, the luxury market has been powered by huge gains in the stock market and the anticipation of a bump in bonuses this year. An interesting leading indicator of the luxury market can be found in the Federal Reserve data of 2020 when the total net worth of the top 1% in the U.S. was $30.3 trillion. By the end of Q2 of 2024, that number grew to $46.7 trillion, and the expectations for the elite 1% are even stronger for this year.

What can we expect in 2025? It's never an easy guess, but here it goes … Interest rates are not expected to go down next year, especially with the Fed indicating that prime rate cuts will be few and far between. However, with the expectation of the 1% getting wildly richer this year, mostly due to deregulation in the stock markets, there should be stronger activity over the next couple of years. Still, only time will tell how things play out in the Manhattan and Brooklyn 2025 sales markets.

For 2024, homes were still trading at around 2018 to 2019 price levels. There has been no real increase in overall property value since then. Of course, there are exceptions, and the luxury market did see a price increase of about 4% on average in 2024 compared to 2023. However, the asking price for standard New York City properties has remained flat. What we're looking for in 2025 is an increase in transaction rate, first and foremost. An increase in the volume of property going under contract will help the overall real estate market moving forward. Only then can we talk about how the increased volume might affect pricing.

Overall supply is another interesting facet to look at for the 2025 New York City real estate market. At the end of 2024, listing supply inventory was trending down, as it typically does towards the end of the year. But last year, particularly after August, there was less inventory than usual by about 500 to 700 units, depending on which month we look at. At the time of this article, there were 5,371 listings on the market. There's not going to be an increase in overall inventory until mid to late January. By the middle of the spring season, we should see inventory surpass 7,000 units. We have a long way to go before we reach that amount, but this is a good indicator of the health of the 2025 market to watch in Q1.

Other things to watch for in 2025 include the stock market, interest rates, overall listing supply and the rate at which buyers put property into contract. Those four leading indicators will determine the direction of the 2025 market, and we should see early in the year what direction the 2025 market will lead us. Other factors remain, of course, but I feel if the stock market is strong, interest rates continue to hover around 6% to 6.5%, and listing supply increases to a healthy amount, the Brooklyn and Manhattan markets will remain strong through the first half of 2025!