The Q2 numbers are in and what we’re seeing comes as no surprise. After a long stretch of record-breaking activity this past year and a half, the market is beginning to cool off with sales dropping around 30 percent. Analysts are chalking it up to high interest rates, but we’ve also seen other signs along the way that things were slowly shifting toward a buyer’s market, as I’ve been reporting these past few months.
In fact, as Jonathan Miller, CEO of Miller Samuel points out, wealthier buyers are less concerned about mortgage rates. This past quarter, 53 percent of all apartment purchases in Manhattan were all cash, and more specifically, the luxury market saw about 96 percent all cash purchases. The stock market, rising prices, a looming recession and high taxes are most likely other factors contributing to the decline in sales.
Our CEO, Bess Freedman, says “This is a market in transition. Buyers are in the driver’s seat right now. There is just a lot of uncertainty and weaker confidence.” And while the drop may seem alarming to some, Bess reminds us that “after such an amazing comeback from the impact of COVID-19, it was inevitable that activity would return to more normal levels”, which is where we’re at right now.
Interestingly, prices remain high as sellers are getting top dollar, at least for the moment. But as the market continues to level off and signed contracts slow down further, we should expect to see prices coming back down. The current market also seems to be back to normal, per se, in terms of seasonality, so we can expect sales activity to remain slow during the summer months. We should also take into consideration that the November midterm elections may also have an impact on the market.
As always, I will continue to closely monitor the market and report my weekly findings, as we see how this third quarter shapes up. Please reach out with any questions regarding your own real estate needs or about the just released, Brown Harris Stevens’ Second Quarter 2022 Manhattan Residential Market Report.