Manhattan Market for the week ending September 30th supply of 7,398 remains in line with last year. Contacts Signed, 2,827 has broken the 3,000 thresholds we have not seen since January 2021. The fall season’s lackluster enthusiasm is due to several factors: stock market jitters, rising rates, environmental and economic turbulence abroad and domestically, and holidays. We await to observe if contract activity will bump up in late October and early November.
Market Demand
The overall Manhattan Market’s supply/demand market pulse ratio shows buyers have the leverage advantage. The market pulse, at .38%, sits at the base of neutral territory. Jonathan Miller, CEO of appraisal firm Miller Samuels indicates, “Home Prices are sticky on the downside, meaning that when markets fall, sellers are reluctant to take a lower priced because they stick to the value, they think it’s worth.” In NYC, unlike other areas of the Country, owners can wait out this downward market cycle. Another option is to become a landlord. Rent their apartments due to demand and low vacancy rates in certain sub-markets.
The third quarter market report from Coldwell Banker Warburg suggests it may be some time before the market settles. There’s a “quality of randomness to what sells and what doesn’t,” says President Frederick Warburg Peters. The report notes that smaller and mid-sized apartments sold more briskly throughout the third quarter than larger units.
Mortgage Rates
The Federal Reserve’s policy to increase the cost of borrowing has effectively cooled the Manhattan sales market. “The average lender has moved back down from the low 7s to the mid-to-high 6s when it comes to conventional 30yr fixed rates,” per Mortgage Daily news. Last week as expected, the Fed raised another ¾ percentage point last week intending to combat unrelating inflation. Additionally, the Fed indicates it would likely raise rates another .75 basis to a target of 4.4% by the end of 2022. The terminal rate is the peak spot where the market believes the Federal Funds rate will climb before they scale back. The market rate expects the terminal rate to end. The market continues to change its exceptions of the terminal rate. On September 7, 2021, the terminal rate was 1% and increased each time the Fed raised expectations. The market’s terminal rate is pegged at 4.6% by April 2023. Every time a shift in the terminal rate pushes higher, we will witness the markets under pressure and respond accordingly.
Mortgage rates should stay steady unless the terminal rate expectation changes again.
Labor Market
Liz Ann Sonders, chief investment strategist at Charles Schwab in FT, indicates that the Fed is comfortable tackling inflation by raising rates because the U.S. Labor market is strong. However, a “look under the hood highlights that there may already be some breakage in the labor market, not picked up by traditional headline indicators — including payroll growth and the unemployment rate.” The article concludes: “With labor, the highest input cost for many companies, and economic growth and demand weak. The hints of weakness in the labor market are likely to foreshadow further deterioration. As the Fed has been pointing out, it may be a necessary ingredient in the quest to quell the surge in inflation.”
As companies and residents move their lives back to patterns of normalcy, New York City continues to be a draw. The city’s seasonally adjusted unemployment rate was 6.6 percent in August 2022, up 0.6 percent from July and a decrease of 2.7 percent from August 2021, as reported by the NYC Labor Statistics. The increase in the unemployment rate was accounted for by the commensurate rise in the number of people entering the labor force, which caused the labor force participation rate to rise to 60.9 percent, its highest level over a decade.
New Development
“For a holiday week, the decrease in contract volume was pretty negligible. Luxury deals were down significantly, but the market below $2M is holding strong despite rising rates.”
– Kael Goodman, co-founder, and CEO
Contract volume decreased 11% last week due to the two-day Jewish holiday. Sponsors reported 56 deals across 41 projects, totaling $103,715,975. The average asking price dropped significantly to $1,852,070 (- 37%) and $1,594 PSF (-22%), but these figures are swayed by the 75% drop in luxury activity. Only 4 contracts above $4M were reported compared to 17 prior weeks when The Cortland had a large batch of deals.
Manhattan had 24 (-40%), Brooklyn had 23 (-64%), Queens had 9 (0%).
Contracts $4 million and Over
Fourteen contracts were signed at $4 million above in the Manhattan Market, comprising eight cooperatives and 6 condominiums. The lackluster total is blamed on rising interest rates disastrous stock market. In addition to the two-day Jewish holiday, which typically creates a lull in the action of the New York City Market. The top contract signed was $16 million for 23 East 22 Street Unit 57A, which has an amazing view of the Empire State Building and Madison Square Park. The media mogul Rupert Murdoch owned the apartment.
UrbanDigs, John Walkup, the firm’s co-founder, says we can “expect activity to continue at lower levels this fall. This will likely lead to cascading, moderate price declines.”
Other educational articles about the market and your home search are under Karen’s Blog.
New York by the Numbers Monthly Economic and Fiscal Outlook.
