While the latest quarterly report doesn’t deliver the best news in terms of sales activity, there is hope for 2024 given the drop in mortgage rates, dipping below 7 percent in December as I mentioned last week. As of today, the average rate stands at 6.6 percent, and with the Fed’s announcement of three interest rate cuts this year, we should expect to see buyer interest rejuvenated, kickstarting both the sales and rental markets.
I felt it was important to start with this encouraging news because 1) what better way to kick off the new year than with good news and 2) it will help make better sense of this past quarter’s numbers. As we covered ad nauseam over the past year, sellers were not willing to risk losing their incredibly low mortgage rates—some as low as 3 percent—which ultimately stifled inventory resulting in extremely low levels. Buyers were also deterred by the high lending rates, further hindering market activity. According to Brown Harris Stevens Q4 2023 Manhattan Apartment Market Report,
The closings in Q4 were just 2 percent lower than in 2022, yet the total closings were 27 percent lower across the whole year;
The average days on market for resale apartments was up 17% from a year ago;
Seller discounts were bigger than what was being offered in Q4 2022; and
Contract activity was down sharply, with the fewest contracts signed in a fourth quarter since 2008.
On the flip side, the average sales price was up 3 percent from Q3, while luxury sales prices increased a whopping 12 percent over the same period—perhaps a sign that things are slowly taking a turn for the better. We can certainly bet on that, if and when mortgage rates drop further, and more listings come up on the market. With more options available to buyers, it is expected that prices will eventually rise.
Also worth noting, as our CEO Bess Freedman points out in the report, is the inflation rate continues to decline, and there's solid momentum in both hiring and consumer spending. These are signs that the Fed is on track to achieve the economic soft landing it's been aiming for—bringing inflation under control without triggering a recession. Another glimmer of hope, as we see some positive shifts in the market, is that trends that hindered progress for most of the year appeared to be easing up in the fourth quarter of 2022.
If you have questions about the report or would like to discuss your real estate goals for 2024, please call, text or email me. I’m happy to help!