Following a big burst of activity from mid-February to mid-April, the residential real estate market lost a little bit of its luster in May.
“We re seeing a bit of a change,” said Jonathan Miller, president of the appraisal firm Miller Samuel Inc. and the author of the quarterly Douglas Elliman Manhattan Market Overview. “We went through an incredible period of activity, and it s still the same story, where there is tight inventory and there are rising prices, but some of the edge has come off the market.”
The change is a result of interest rates climbing higher – rising a full percentage point between the end of March and the end of May – and also more inventory as result of the traditionally busier spring season, brokers said.
Inventory had already started to rise in previously months, according to Miller, by 7.6 percent in March over February and by 20 percent in April over March.
“The market is still tight,” said Christopher Mathieson, partner and co-owner at JC DeNiro. “But with more product on the market, there s been less stress.”
Ruth McCoy, executive vice-president at Brown Harris Stevens, said the market “maybe doesn t seem as frantic as before, but it s still quite, quite busy.”
Mathieson said he is still seeing multiple bids and overask offers, though apartments aren t appreciating as rapidly now.
“There have been severe price increases since the beginning of January, but that s starting to level out a bit,” he said.
Miller agreed that price increases are slowing down as a result of rising mortgage rates, but said it s a positive development.
“Rising mortgage rates are going to take double-digit appreciation and make it single-digit,” he said. “We re being weaned from an interest-rate driven market to a rather nuts-and-bolts market.”
“It s sort of a good thing,” Miller added, saying that an interest-rate driven market, taken to the extreme, “can t be sustained. Theoretically, if it goes unabated, you can have a collapse.”
Daren Hornig, president and CEO of Dwelling Quest, also said in late May that “sales have definitely been cooling off in the last 30 days,” but the change was “healthy for the marketplace.”
“Before there would be 10 other offers, now there will be four or five,” he said. “If it s a good property, it s still moving quickly, but there is not the same irrational exuberance as before.”
But the rental market, which has been slow, is taking off, he said.
“The rental market is certainly heating up big time,” Hornig said.”This is the time of year when there are a lot of graduations.”
“There is still a lot of tire kicking going on,” he said. “I think the rental market will tighten up even more significantly this summer.”