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“Paralysis” hits Manhattan home buyers

Caution reigns as stocks and crypto fall, mortgage rates rise

Douglas Elliman's Frances Katzen (Douglas Elliman, iStock)
Douglas Elliman's Frances Katzen (Douglas Elliman, iStock)

UPDATE: June 28, 1:15 p.m. ET: Buyers in the Manhattan housing market have lost their sense of urgency as a myriad of factors change the landscape.

Agents and real estate experts have more caution among shoppers in the borough, Bloomberg reported. The reasons include a rise in mortgage rates and big drops in the stock market and cryptocurrency.

While signs of a nationwide slowdown are beginning to appear, a particularity about the Manhattan market is the propensity of cash buyers, which reduces the impact of rising mortgage rates. About half of the home purchases in the borough do not involve a mortgage.

But cash buyers do typically own a lot of stock, and some now have large cryptocurrency investments as well. Their net worth has dropped significantly this year.

“You get people going into paralysis or simply taking a moment to recalibrate and say to themselves, what do I need to do?” Douglas Elliman agent Frances Katzen told Bloomberg.

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Recently, Bitcoin fell below $20,000 for the first time since late 2020, the New York Times reported. When it sank below $19,000, about $900 billion of value had been wiped out since its November peak. Two other cryptocurrency projects, Terra-Luna and Celsius, have collapsed in recent weeks.

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The stock market, meanwhile, has been battered by inflation concerns and monetary policy. Real estate stocks have not escaped the bloodbath — real estate investment trusts were down by 24 percent this year as of mid-June, and industrial and multifamily stocks have plummeted since peaking in December — but the issue for residential sales is that buyers feel less confident when their net worth has fallen.

Sales appear to be slowing more than the usual summer swoon this year. Some agents believe the market could be returning to pre-pandemic levels.

The number of signed contracts in the borough has dropped annually every week since April 11, according to UrbanDigs. For the week of June 13, contract signings were down 28 percent year-over-year, although still higher than they were before Covid.

According to a report from Kevin Brown of Sotheby’s International Realty — East Side Manhattan Brokerage, only 25 contracts were signed for new condo units for the week ending June 25, a drop from 38 signed contracts a year earlier. The average price per square foot fell by $300, while the total sales volume fell from $107 million to about $65 million.

Buyers no longer feel compelled to engage in bidding wars. “There’s no more fear of missing out,” Compass agent Kimberly Jay told Bloomberg.

CORRECTION: This story has been updated to reflect the source of information for the new condo unit contract report.

[Bloomberg] — Holden Walter-Warner

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