Manhattan Apartment Sales Tumble, as Prices Drop for First Time Since Early 2020

A night view of 1 West 72 Street in New York City, where only two of 103 apartments are available for sale. (Matthew Peyton/Getty Images)

Manhattan apartment sales plunged in the last quarter, as prices dropped for first time since the pandemic in 2020.

Brokers are becoming concerned that buyers and sellers are holding back because of economic fears and higher interest rates in one of the largest real estate markets in the United States, according to a report from Douglas Elliman and Miller Samuel, the real estate appraiser and consulting firm.

The Federal Reserve’s interest rate hikes, along with a weakening economy, rising prices, and recent tumbles on Wall Street, has had an outsized impact on Manhattan real estate, which is likely to persist into 2023.

“I could see the market moving sideways, with some modest declines in some sectors, Jonathan Miller, CEO of Miller Samuel, told CNBC. "And it could weaken further if there is the backdrop of recession and job loss.”

“Sellers aren’t going to get the prices they got in 2021 and buyers aren’t going to get much improvement on affordability from 2022,” Miller told CNN.

Higher mortgage rates and elevated housing prices led to cooler demand at the end of 2022, causing sales to tumble.

Manhattan Sales Tumble Due to High Mortgage Rates and Prices

Apartment sales in Manhattan fell by 28.5 percent in the fourth quarter of 2022.

Only 2,546 apartments were sold in the final quarter of the year, down from 3,560 in 2021, raising concerns that the market would remain weak through 2023.

This was the largest decline in sales in Manhattan since the third quarter of 2020, when many residents fled New York at the height of the pandemic, but 2021 saw an apartment buying frenzy as the city bounced back.

The sudden drop in both sales and prices between October through December, appears to mark the end of the real estate boom in the center of New York City.

The median unit price fell to $1,100,500, at 5.5 percent, as prices fell for the first time since early 2020, but remains above pre-pandemic levels.

The largest number of sales were one-bedrooms apartments, with a median price of $1,140,000.

The median price for a two-bedroom condo was $2,150,000, while co-ops were lower, at $710,000 for a one-bedroom and $1,325,000 for a two-bedroom apartment.

However, median prices for luxury apartments in Manhattan rose 21 percent compared to 2019, twice the increase as the rest of the market.

High-end apartments prices rose 4 percent in the fourth quarter, compared to a decline in the rest of the industry.

Rising interest rates have also led to a larger proportion of apartment purchases in cash, which accounted for 55 percent of all sales in the fourth quarter, the highest on record, according to Miller.

“The numbers are essentially acting like the pandemic didn’t happen,” he said, noticing that prices and sales were back above 2019 levels, by 10 and 6 percent, respectively, according to market metrics.

Meanwhile, the end of year sales plunge has led the Manhattan apartment market back to its pre-pandemic trajectory.

Inventory Growth Fails to Materialize

There were 6,523 listings in Manhattan at the end of the fourth quarter, up from 5 percent over the same quarter in 2021, but a 15.7 percent decline from the third quarter of 2022.

The primary difference is that new inventory has been slow to materialize, with apartment stock falling 2 percent in the fourth quarter.

“This is an unusual situation where the low inventory is the by-product of mortgage rates being cut to the floor,” Miller told CNN. “Normally, you’d expect inventory to expand with significant rate growth.”

Many sellers have been unwilling to their list their apartments due to falling prices, while those who took advantage of years of low mortgage rates, to purchase and refinance their homes, are now reluctant to move since rates have gone up.

Buyers, on the other hand, are still waiting for housing prices to drop even further, but this has been affected by the lack of a major boost in inventory, said the report.

Brokers are hopeful that the recent drop in the dollar’s value and the ease in travel restrictions from China in December will lead to more growth in the sector as foreign buyers return to the city.