Brown Harris Stevens CEO Bess Freedman was right when she told Mansion Global back in early January that the NYC real estate market is “going to be a little challenging in the first quarter and maybe into the second, but I think we’ll rebound and start picking up again.” Last month's sales activity for both the condo and co-op markets was down roughly 50 percent from the previous year for the month of January.
This comes as no surprise as we saw a 35 percent decline in closings coming out of Q4 last year, and analysts were expecting this slowdown to carry over into the new year. The sluggish market had an impact on January inventory as well, which was down 9 percent from the previous month according to the recent report from our in-house economist, Greg Heym. The supply shortage is one of the reasons we’re seeing the drop in activity, according to real estate appraiser, Jonathan Miller, CEO of Samuel Miller, along with the state of the economy and high interest rates.
On the flipside, we learned at our last office meeting that Wells Fargo reported more than a 20% increase in purchase loan applications. This lines up with the direction of the Mortgage Bankers Association weekly survey results, which reported a 7.4 percent increase in mortgage applications in one week. The increase in applications is being attributed to the drop in mortgage rates we have witnessed over that last five consecutive weeks. In his State of the Union address last night, President Biden said the rate of inflation has declined for the sixth straight month and is at its lowest level since October 2021. This is encouraging on the interest rate front, as rates tend to move in the same direction as inflation.
The way I look at it is there is light at the end of the tunnel. As Bess predicted early on, the market will eventually normalize and pick up again. Spring—real estate’s most active season—is just a month away so it will be interesting to see how the market performs in the months ahead as we lead up into summer. If you have any questions or would like to discuss your real estate goals.