November 2022 Market Update

November is a month in which we celebrate family, express our gratitude, and give back to the communities in which we live. As a team, we truly appreciate our role in the New York City community and strive to be positive, supportive, and charitably minded. We are also incredibly grateful for our clients that put their trust in us this year.

November is also traditionally the month where we start to see real estate transaction volume begin to slow, a trend which tends to continue throughout the holiday season. This year, we experienced a slowdown in deal volume late in our spring market as interest rates shot up, a result of the Fed’s actions to slow an overheated economy. In Manhattan, pending sales are currently down 32.5% from this time last year, and down 4.5% in Brooklyn, although we did experience a weekly uptick of 13% in pending activity across the city last week.

While buyers have certainly gained an advantage of late, there are several factors keeping our market relatively stable. Supply has remained incredibly tight. We haven’t seen an uptick in inventory in Manhattan from last year’s already low supply environment, and in Brooklyn we are down an additional 15% over the same period. Rental prices, while easing slightly, remain historically high. Additionally, while much of the country saw an unprecedented run on property that pushed real estate prices up meteorically, we saw modest, more sustainable gains.

Sellers are not panicking, and those that price in line with the changing market are faring well. The average seller currently on market bought their property in 2014 for $830,000 and has a list price of $1,400,000. Due to that price appreciation and the high equity that New York homeowners tend to have in their home (think large down-payment requirements and substantial liquidity), sellers are not giving much ground. The market has lost ~7% value from the recent peak in Manhattan and ~4% in Brooklyn. Manhattan most likely has a little more loss of value ahead, but market dynamics seem to indicate that Brooklyn is currently experiencing its bottom.

Many real estate markets around the country will lose significant value over the coming months. In NYC, we have essentially shifted back to our 2019 market. In October, the average listing discount was 3.9% in Manhattan and 3% in Brooklyn. We look at 6% average listing discount as a signal of a true buyers’ market. Manhattan currently has 5.3 months worth of inventory (absorption rate) and Brooklyn has 2.7 months. 6 months of inventory constitutes a balanced market. There simply is a smaller buyer pool for a smaller amount of inventory.

The market is ripe with great opportunities for buyers. Those that need to sell will make concessions to do so. That group includes developers, so we are encouraging our investor clients to target the new development segment, particularly with its corresponding pumped up rental numbers. We have been successfully negotiating mortgage rate buy-downs for our buyer clients as well. The Fed’s actions are beginning to show signs that they are gaining traction. The stock market has reacted favorably. This should bolster our luxury market, which is more tied to equities than interest rates (which just had their largest weekly dip since 1981, and we are seeing jumbo rates in the low to mid 5’s). The diverse market segments within our city experience differing conditions, and offer arbitrage opportunities which can be taken advantage of with the right counsel.

There are many ways to make this dynamic and intricate market work in your favor. 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. Have a very happy, healthy, and abundant Thanksgiving!