In New York City, during the third quarter, the downshift in the Manhattan real estate market became apparent, with notable changes compared to Q2. First and foremost, over the quarter, the average and median prices fell 8.4% and 6.4%, respectively, as the frothy level of contract activity which defined the early 2022 market, subsided to typical seasonal levels. While the shift in sentiment began in April, the time lag to closing means the first ripples of price discovery are being realized in the third quarter.

As less frenetic conditions prevailed during the summer, sellers saw their leverage advantage shift towards buyers with median negotiability rising 210 basis points to 3.9%. The subsidence of record deal volume also brought a fade of urgency on the buy-side with units remaining on the market longer. The median days on market rose to 82 days compared to 50 in Q2. With prices dipping, discounts rising, and inventory lingering, sellers may be worried that buyers have stepped away. While buyers do prefer rising markets, the data suggests that today’s market is performing at seasonally appropriate levels, with properly priced units moving quickly at or near their asking price.

The larger, macroeconomic backdrop which could perhaps alter buyer perceptions is the fed funds rate, which nearly doubled from 1.58% on July 1 to 3.08% currently. If the expected fed funds terminal rate continues to see upward revisions, risk assets, including real estate, will likely see more volatility as both buyers and sellers reassess outlooks and portfolios.

Entering the fourth quarter, sellers should reevaluate their pricing and get ahead of the market. Buyers have value, choice, and reasonable interest rates, even if they are no longer at record lows, so they should keep an eye on their local market to spot the opportunities that will undoubtedly arise. Going forward, the depth of this slowdown will be revealed more fully over the next few quarters as prices slowly react to a normalizing market

Steven James,
President and Chief Executive Officer

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