Manhattan apartment sales plunge in Q4, brokers fear frozen market

Craig Warga | Bloomberg | Getty Images

Manhattan apartment sales fell 29 percent in the fourth quarter, amid fears of a frozen market in which buyers and sellers remain on edge due to economic and rate fears.

According to a report by Douglas Elliman and Miller Samuel, there were 2,546 sales in the quarter, down from 3,560 last year. The decline was the largest since the third quarter of 2020, at the height of the pandemic.

Prices also fell for the first time since the start of 2020, with the average price falling 5.5%.

The decline in both sales and prices marks the end of a booming comeback in Manhattan real estate after the worst days of the pandemic and raises fears of continued weakness in the new year. Rising interest rates, a weak economy and a falling stock market, which has a major impact on Manhattan real estate, may all weigh on the market this year.

Analysts say their biggest concern is the long standoff between buyers and sellers — with sellers reluctant to list amid falling prices and buyers putting off their searches until prices drop further.

“I could see the market going sideways, with some slight declines in some sectors,” said Jonathan Miller, CEO of Miller Samuel, a valuation and market research firm. “And that could weaken further if there is a backlash of recessions and job losses.”

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Even as prices and sales drop, however, inventory remains tight as sellers hold on to listings. There were 6,523 apartments on the market at the end of the fourth quarter, up just 5% from last year but still below the historical average of around 8,000, according to the report. Without a big increase in inventory, analysts say it’s unlikely prices will drop enough to lure back many buyers waiting for discounts. According to Serhant, the average discount from initial list price to sale price was 6.5%, up from 4.1% in the third quarter.

Rising interest rates have also pushed more Manhattan buyers into all-cash transactions, which accounted for 55% of all sales in the fourth quarter, the highest on record, according to Miller.

As with most upgrades, the high-end and luxury segment remains the strongest. Median sales prices for luxury apartments — defined as 10% of the market — rose 4 percent in the fourth quarter, compared to a decline in the broader Manhattan market. Average prices of luxury apartments increased by 21 percent compared to 2019, which is twice the increase of the broader market.

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The perspective of 2023

A series of deals in the works or recently signed suggests a slow first quarter. According to Brown Harris Stevens, only 2,312 contracts were signed in the fourth quarter, down 43% from last year. According to a Serhant report, the quarter was the worst for new contracts signed in the past decade.

According to Brown Harris Stevens, “Signed contracts are a long-term indicator of demand and recorded one of the slowest completions of any year since 2008.”

However, brokers say they remain optimistic and many predict an upside surprise in 2023, as rates stabilize and buyers see opportunities in a softer market. John Gomes, co-founder of the Eklund Gomes team at Douglas Elliman, said December was “burning” with a frenzy of year-end deals.

“It really caught us off guard,” he said. “Things really turned around in December.”

Gomes said one buyer paid $20 million for a townhouse in Greenwich Village that wasn’t even on the market. He said a real estate investor made offers for four separate apartments in the new development “that look like they’re going to be approved today.”

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Ian Slater at Compass said there was a big “disconnect” in the market in August and September, with a wide divide between buyers and sellers and the market started to weaken. “Now I see buyers accepting interest rates as the new normal and feeling more comfortable with their purchases – or at least that prices aren’t going down.”

Gomes said one reason for the explosion of activity in December was foreign customers, who began returning to the city in December. With the dollar weakening slightly and travel restrictions lifted around the world, brokers say buyers from the Middle East and China returned in December.

Brokers say buyers are also using cash to avoid high interest rates and take advantage of low prices. And developers with new apartment buildings on the market are lowering prices to offload unsold apartments.

“Developers are realistic, they make concessions on price and closing costs,” he said. “I’m looking forward to next year.”


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