In the last 30 days in the residential resale market, there’s been a steady rise in the number of price reductions. Listing supply has increased slightly, but that may ebb as we move further into the summer months. Contract activity has been relatively steady, despite the spreading uncertainty and unease created by a confluence of unmitigated factors, namely rising interest rates (up .75% yesterday with more hikes to come), the ongoing war in the Ukraine, out of control inflation and stock market volatility.
What are we seeing?
• Many sellers are holding on to their cheap mortgages and staying in their homes, some considering renovating and other postponing the decision to make a trade.
• Since it’s more expensive to borrow in a rising mortgage rate environment, entry level buyers are impacted more than larger ticket purchasers. Now more than ever, first time buyers are counting on parental gifts for help.
• High end sales have been trending down since the first week in May. According to Donna Olshan who tracks deals above $4 million, of 43 contracts signed that week, none was above $10 million for the first time since September 2020. In the week before Memorial Day, there were 21 contracts above $4 million, slightly lower than the 10-year average of 26 for that time period. “The sobering thing for New Yorkers is watching the stock market,” she observed. A seasonal slowdown is expected for hi-end sales. For the contrarian buyer, there’s a window of opportunity to step in to make a luxury purchase while fellow cohorts are vacationing in the Hamptons and the Vineyard.
• New York City’s rents were at an all-time median high of $4,000 in May with an average price just shy of $5,000. Demand and competition will surely increase as more buyers are being pushed into rental options because of increased mortgage rates. Competition will also increase in the next few months as new lease signings generally peak in August.
• We’ve heard from our associates outside of Manhattan in Westchester, Connecticut and Long Island where previously there was a pandemic induced frenzy with buyers bidding competitively on far too few homes, that their markets may be normalizing.
• Fewer showings have become the norm. For nearly every property, first visits occur online. When a potential buyer actually visits the residence, the meeting is akin to a second showing. Additionally, pandemic protocol which stipulates “by appointment only open houses” is considerably limiting the number of views by agents and buyers.
I’ve been through multiple economic cycles in my career, including three downturns since 2000: there was the dot com bubble that was worsened in the aftermath of 9/11; the Great Recession of 2008-2009 caused by the subprime mortgage crisis; and the recent collapse caused by the pandemic in 2020. If the Fed’s necessary economy tightening tactic of raising rates tips us into a recession, we hope it’s neither deep nor long. One thing is for certain: you need a trusted advisor in your corner to navigate the challenges.
Shirley Hackel, NYRS®
shirley.hackel@compass.com | (914) 980-0371