New development boom dead, with mortgage rates a prime suspect

Activity fell below pre-pandemic levels for the second time in three months

Related Companies’ Stephen Ross and The Cortland (Related Companies, The Cortland, Getty)
Related Companies’ Stephen Ross and The Cortland (Related Companies, The Cortland, Getty)

No matter how high developers build, they can’t avoid gravity.

New-development contract signings in September fell below pre-pandemic levels for the second time in three months, according to a report by Marketproof. The numbers are the strongest evidence yet that the market’s pandemic sugar high is coming to a close.

“This is a healthier diet,” said Kael Goodman, founder of Marketproof. “We’re just back to normal.”

Across the city, developers reported 215 contracts for units last asking a combined $495 million. The median asking price was $1.5 million or $1,682 per square foot, relatively unchanged from last month. But mortgage rates blasted through the 6 percent threshold.

While the number of deals fell by 16 percent, the median and price-per-square-foot numbers hardly changed, which means the drop from August was equally divided between big-ticket and below-average apartments.

While activity is roughly on par with 2019 levels, price per square foot is up 22 percent since then. Contracts can take months to become closed sales, and some never do, but they provide a more current picture of the market.

Activity dipped by 11 percent in Manhattan from August, but the median price rose as entry-level buyers were increasingly sidelined by rising mortgage rates.

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In all, the borough’s new developments notched 104 contracts for homes last asking $350.9 million. That’s a whopping 40 percent decline in deals from last September, but it’s still 24 percent above the 2019 total.

At least in terms of contract activity, the market’s recent declines look less like drowning and more like a return to sea level.

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That said, pricing is way up. The median asking price for Manhattan units finding buyers increased by nearly 20 percent in September to $2.3 million or $2,116 per square foot. Developers reported four contracts for units last asking more than $10 million, including the penthouse of 35 Hudson Yards. While that deal closed for a massive $35 million, it was still a 41 percent discount from the $59 million asking price.

The month’s top performing new development was The Cortland, the Related Companies’ Chelsea project. It notched 22 deals in September.

Brooklyn’s developments took a bigger hit. New projects there reported just 80 contracts, down from 110 last month. Pricing was not the reason, as the median price per square foot dipped to $1,297. But rising mortgage rates made homes more expensive.

Hudson Companies’ One Clinton had the priciest unit go into contract as a five-bedroom apartment last asking $8.9 million came off the market. Fortis Property Group’s perennial top finisher Olympia Dumbo secured the number two and three spots.