January 2025 in Review

Last month, I found myself constantly checking my news app, captivated by the significant changes unfolding within the federal government. While there's still much to be resolved and the impact on Manhattan and Brooklyn's real estate markets remains uncertain, I can share insights from the first third of the first quarter of 2025.

As we entered January 2025, one of the standout observations was the inventory level. At the start of the month, Manhattan had approximately 5,000 units on the market, marking the lowest Q1 start since 2016. Since then, inventory has been gradually increasing, though it remains about 7% lower than this time last year. Many industry experts anticipate a rebound to normal levels by March, but the current low inventory is already influencing both sellers and buyers.

Open houses have seen a resurgence, with buyers actively attending—an almost post-COVID novelty! We've even witnessed a few bidding wars. For instance, a three-bedroom on East 9th Street sparked competitive offers, and a two-bedroom on East 71st Street, relisted for $100,000 above the previous broker's price, sold for an additional $20,000. These developments highlight increased buyer urgency, likely driven by the limited inventory.

I regularly monitor the 30-day pace of buyer demand, and as we wrapped up 2024, it was about 20% higher than the previous year. This indicates a significant uptick in inventory under contract. Although January is typically a slow period for new listings and contracts, the in-contract rate is still approximately 8% higher than last year. This suggests that buyers are returning to the market, continuing the momentum from strong Q3 and Q4 numbers. It will be interesting to see how this trend evolves as more inventory becomes available, offering buyers additional choices.

In January 2025, interest rates have remained steady around 6.5%, with a slight dip closer to 6% as I write this newsletter. The Federal Reserve is not expected to adjust rates until mid to late summer, having opted to maintain the status quo at the end of last month without further commentary. While the Fed's plans can shift monthly, industry professionals remain cautiously optimistic as we progress through Q1.