September – 2023 Market Update

The LevinKong Team hopes you are enjoying this crisp and comfortable fall weather. For many New Yorkers, this is our favorite season in the city. It’s also when our real estate market typically returns to life after a summer lull, and inventory and buyer activity start to percolate again.

After more than two decades in the New York City market, this year differs from most we have experienced in the past. Where July and August are usually two of our slower months, this year it was our busiest season to date, primarily due to economic optimism. The most recent Fed meeting took some wind out of that sail. September is a month that we typically see a significant ramp-up in inventory. This year, supply has only ticked up modestly. Inventory levels are down 6% in Manhattan and 12% in Brooklyn from last year. Demand has yet to be at the levels we saw before the dramatic interest rate hikes. However, the market pulse (pending-to-active-ratio) is up 30% in Manhattan and 33% in Brooklyn year-over-year.

It is an incredibly segmented market with clear winners and losers. While price-per-square-foot averages across Manhattan and Brooklyn appear relatively flat over the past year, a closer examination shows otherwise. Digging deeper into nuance and looking at micro-markets within each market segment has become more critical than ever. We are genuinely in a quality climate where premium buildings, prime locations, and pristine properties are encountering buyer competition. The less desirable housing stock is experiencing a shortage of activity, and significant price drops are necessary for much of this inventory to trade. Prime Brooklyn locales like Park Slope and Williamsburg, where demand far outstrips supply, see bidding wars and above-ask sales as the norm.

Interest rates are the most profound source of headwind, as many potential buyers remain sidelined, and many would-be-sellers prefer to stay put. The latter has caused a shortage of listings in many of our market segments. At the same time, a record level of cash transactions are occurring. According to Crains, a staggering 99% of deals over $5 million and 52% under $1 million involve no financing. Empty nesters returning to the city or buying second homes make up a disproportionately large percentage of these buyers. Higher interest rates are holding back many. However, there are definite targets of opportunity. Savvy buyers will take advantage of lower demand for specific properties, refinance in the near future, and be rewarded with solid appreciation when the floodgates reopen.

With proper guidance, many ways exist 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 let us know if we can answer any questions you may have about the market or how best to navigate complicated decisions.