Manhattan’s real estate market is experiencing a significant shift towards becoming a buyer’s market in the second quarter of 2024. Reports indicate a decline in apartment prices and a rise in inventory, signaling a change in the landscape of the real estate sector in the area.
The average sales price for real estate in Manhattan has fallen by 3% to slightly over $2 million, while the median price has decreased by 2% to $1.2 million. Particularly, prices for luxury apartments have dropped for the first time in over a year. These price declines are attributed to the increasing inventory of apartments for sale, which are also taking longer to be sold.
There are currently over 8,000 apartments for sale in Manhattan, surpassing the 10-year average of around 7,000 units. This increase in supply has led to a 9.8 month supply of apartments for sale in Manhattan. Brown Harris Stevens reports that any supply over 6 months indicates an oversupply, putting Manhattan in a buyer’s market territory.
The falling prices and rising inventory of unsold apartments in Manhattan contrast with the national real estate landscape, where tight supply continues to drive prices high. Brokers and analysts suggest that the strong post-Covid prices in Manhattan were unsustainable, leading to both buyers and sellers adjusting to a higher interest rate environment.
As the gap between buyer and seller expectations narrows, more deals are being closed. The second quarter saw a 12% increase in sales from the previous year, marking the first sales rebound in two years. High rents in Manhattan are also playing a role in boosting sales, with the average rental price in May still above $5,100 a month.
The high rental prices are encouraging potential buyers who were waiting in the rental market to transition into home buyers, hoping for a decline in interest rates by the end of 2024 or early 2025. While mortgage rates have a less pronounced effect on Manhattan real estate due to a higher prevalence of all-cash deals, the market is still responsive to interest rate changes.
Despite price declines across all segments of Manhattan’s real estate market, the luxury segment appears to be among the weakest. The median sale prices in the luxury segment, representing the top 10% of the market, fell by 11% in the second quarter, with a 22% increase in listing inventory of luxury apartments.
Manhattan’s real estate market is undergoing a significant transition towards a buyer’s market, characterized by falling prices, increasing inventory, and a shift in buyer and seller expectations. While high rental prices and potential interest rate changes are influencing buyer decisions, the luxury segment of the market appears to be facing challenges due to uncertainty surrounding external factors such as elections.
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