What happened to Manhattan’s 2024 Spring Market?

Well, there was a spring market. It just didn’t rise to the expectations of historical norms. There are many thoughts on why the 2024 spring market was so lethargic, but the only real reason is interest rates. Rates are usually the first topic of conversation when describing the 2024 Manhattan spring sales market.

Looking at the broader picture first, interest rates at the beginning of the season dipped to around 6.4% from their late Fall 2023 highs of close to 8%. When the rates fell to about 6.4%, it was like a breath of fresh air, and buyers became active again. They especially took advantage of dips in listing prices for any inventory leftover from Fall 2023. Many in the industry believed that if rates continued to decline into the spring of this year, the market would rebound. However, that’s not what happened. Rates steadily climbed to 7% and even 7.5%, causing the spring season to lose what few transactions it had.

To put the effect of higher rates on the 2024 spring market into better perspective, if you look back at historical data, you’ll see that during any 30-day window during past spring seasons, about 1,100 properties go into contract. We’re talking about condos, co-ops, townhouses, and even new development sales – more than 1,000 homes will go under contract every 30 days. This year, however, the 30-day contract signed meter never really rose above 950, and most of the time, it was hovering around 930 to 935 contracts every 30 days.

So, what does that look like on a weekly basis? Historically, there are about 350 to 400 homes going into contract each week. During the spring season, between April 1 and June 15, more properties change hands, go into contract and sell between those months than during any other time of the year. However, in 2024, there was no such bump in activity. This year, the weekly in-contract numbers stayed between 200 to 230. There was no significant increase or decrease: The figure just stood in the low 200s all spring long.

Many ask about the supply. Maybe it was the lack of choices that buyers had that caused the contracts to slump compared to past spring markets. Was there just not enough product to choose from, causing purchasers to get disinterested and disheartened, and making them pull back? No, that’s not the case. Overall, listing supply held steady, and it reached its pinnacle, as it usually does, in mid-June, with around 7,400 to 7,450 total listings on the market. Historically, that’s about what the market sees every spring season.

Inventory and overall listing supply were there for buyers to choose from. Sellers were putting their property on the market, looking to unload and sell their listings. But the inventory simply fell on deaf ears. Many buyers either pulled back further or did not move forward with purchases to the tune of about 20-30% lower than Spring 2023. And a lot of that was just psychological, frankly. I say psychological because over 60% of all transactions in Manhattan last year were cash deals, meaning they are completely unaffected by interest rates. Yet, somehow, that didn’t matter. It's psychological.

In a high-interest-rate market, all-cash buyers are waiting, just like buyers who are financing and looking for opportunity. All buyers were and are looking for property values to fall. And there were plenty of price adjustments this spring, anywhere from 3% to 10% of the original asking prices. Listings that did sell in March and April were going into contract at roughly 4% under the last listing price. There were built-in discounts, but in many cases, it didn’t seem to matter.

Buyers still seem to be holding back waiting for interest rates to get closer to 6%. All spring long, it felt like the entire market was waiting for some sort of catalyst or spark that never happened. The catalyst was interest rates. Compass CEO Robert Reffkin spoke to CNBC and said that if interest rates got to 6% or the “magical number of 5.99%,” he would expect a sudden surge of buyer activity at all price categories.

So what happens next? Will interest rates dip to under 6% in 2024? While no one knows for sure, many predict there will be no substantial change in rates until the spring of 2025. What does that mean for buyers this summer? It means opportunity! If there aren't very many buyers out there this summer because of interest rates, and there are sellers who remain on the market with their unsold spring inventory, that means they likely have to sell. Many Manhattan sellers will take the property off the market during the dog days of summer, as they know it’s the slow season. Then, they’ll re-introduce the property in the fall or next spring. But those who stay in the market, those are the sellers who need to sell. And those properties provide an opportunity for buyers to purchase despite the interest rate levels, because the discount off the listing price could potentially be better than a dip in interest rates.

There’s an old saying we’ve heard plenty since interest rates started creeping up over two years ago: “Marry the apartment (price) and date the rate.” That is the mantra and mindset buyers need to adhere to if they’re going to purchase this summer. There will be lower inventory and persistent interest rates, but great opportunities.