March – 2023 Market Update

We, at the LevinKong Team, hope that you are doing well and enjoying the first days of spring. March has been a rollercoaster ride as we saw some of the most wintry weather of the year. We now seem to be fully planted in the highly anticipated spring season. In New York City, we welcome the renewed bustle on our sidewalks and the blooms in our many parks and tree-lined blocks. As we wrap up the first quarter, we are seeing strong signs of a spring return in our real estate market as well (although the financial rollercoaster has certainly kept us on our toes).

Last Wednesday, the Fed continued its bid to tamp down inflation with a modest .25% hike in its key interest rate, and has signaled that one more hike is likely coming this year. This was significantly lower than the .75% hike that most experts had predicted prior to the trouble in the banking sector. Their path forward became a little murkier, as Fed hikes put additional pressure on the banking system. Mortgage rates aren’t directly tied to Fed rate movement, but, rather, to the 10-year treasury yield. However, the Fed toning down rate hikes shows a path forward to lower interest rates. They have been moving downward of late, although don’t expect to see anything with a three handle anytime soon.

Additionally, banks will most likely begin tightening their lending requirements to shore up their defenses moving forward. In NYC, due to the large share of cash buyers, high-net worth individuals, and larger down-payment requirements, this should not stall participation in our market, although this could have a larger impact in many markets around the country. After all, in 2022 more ultra-prime property sales were conducted in NYC than anywhere else in the world. When volatility hits the financial markets, New York is typically the preferred target for high-net-worth and ultra-high-net-worth individuals. We are viewed as a historically strong, safe, blue-chip place to park capital when risk abounds. We are currently seeing this in our business as the well-healed are once again coming to our market from across the country and around the globe in search of safe harbor.

Manhattan has experienced a 6.9% increase in supply month-over month; this is not the spike that we are accustomed to this time of year. Over the same period, we saw a robust 18.7% bump in pending sales activity. Appropriately priced properties and those with recent renovations are faring well, while others are still accruing days on market and price reductions. In Brooklyn, supply very modestly ticked up by 3.1% from last month (in a very inventory constrained environment), while demand increased by 7.3% over the same period. This has led to some frustrated would-be buyers and an increase of 2.8% in price-per-square-foot from this time last year in the borough. High rents are still creating great investment opportunities as well.

With proper guidance, there are many ways to take advantage of this dynamic and intricate market. More than ever, a data-driven, research-based approach, rooted in decades of experience, will equip our clients to thrive in this environment. Please stay safe and let us know if we can answer any questions you may have about the market, or how best to navigate complicated decisions.