Manhattan Residential Market Reports Q2 Turnaround

Caught in a staring contest with stubbornly high mortgage rates, sellers in Manhattan’s residential market just blinked.

For the first time in seven quarters, sales of condos and co-ops rose on an annual basis, according to Douglas Elliman’s quarterly report. Listing inventory also rose for the first time in five quarters.

The increased activity in the face of still elevated rates indicates a cracking of the freeze among buyers and sellers, report author Jonathan Miller said.

“It’s been two and a half years since the Fed pivoted in early 2022 to seeing the steepest ascent of mortgage rates in 50 years,” Miller said. “Seller and buyer resolve is cratering.”

Sales, which grew 12.2 percent, still sat nearly 6 percent below the second-quarter average of the past decade.

In another trend reversal, financed sales outpaced cash sales for the first time in two years. On an annual basis, cash deals climbed 10.6 percent and mortgage-related deals increased over 15 percent.

At 62.3 percent of all sales, cash deals were still well above their historical 50-50 split with financed transactions, according to Miller. Cash sales have claimed more than 60 percent of deals for four of the last five quarters.

Under the hood, the market showed even more signs of life.

Median sales prices fell 1.5 percent on an annual basis to just under $1.2 million — the sixth price drop in the last seven quarters — but co-op and condo median sale prices grew 1.8 percent and 3.4 percent, respectively.

Some of the top-level price drop can be attributed to buyers favoring cheaper co-ops, which had a median sales price of $850,000, Miller said. Condos sold at a median price of $1.7 million. Co-op sales increased 18 percent on an annual basis, while condo sales rose 5.7 percent.

The average price per square foot rose 1.8 percent year-over-year, which Miller attributed to shrinking apartment sizes.

The luxury market, defined as the top 10 percent of quarterly sales, mirrored the overall market, with sales and inventory jumping 12.4 percent and 22.4 percent, respectively. The median price for luxury homes fell 10.5 percent year-over-year, while price per square foot dropped 4 percent.

New development’s median sale price increased 2.2 percent to just over $2 million, and inventory and sales numbers increased 15.2 percent and 21 percent, respectively.

Miller said that the sales bump preceding a potential rate cut could presage a booming fall market.

“What we have is perhaps a first step out of the standoff between buyers and sellers,” Miller said. “Because of this two-and-a-half-year wait, I suspect even with a 25-basis-point rate cut, there will be an outsize reaction to the cut in terms of supply coming in and demand increasing.”