Home contracts fall, but remember, “last year was a rocket ship”

Mortgage rates, low supply curtail Manhattan and Brooklyn sales; listings down

(Illustration by The Real Deal with Getty)
(Illustration by The Real Deal with Getty)

Homes are not flying off the shelf like they were last year but the New York City market remains tight.

New listings and signed contracts in October fell by double digits compared with last year, according to a monthly report for Douglas Elliman by Miller Samuel.

“Typically in a slowdown we see inventory mushroom. We’re not seeing that,” said report author Jonathan Miller.

New co-op contracts in Manhattan fell by more than 40 percent and condo contracts by over 60 percent from the record numbers of 2021. However, contract signings rose month-over-month as they did in September, an indicator that seasonality is returning, as brokers have said anecdotally.

New contracts over Manhattan’s $4 million luxury threshold declined at a rising rate for the sixth straight month.

“Contract activity is behind last year and I think we all need to understand that last year was a rocket ship, so the comparison is not apples to apples,” Miller said. “This is a market that is coming off the inflated activity fueled by mortgage rates being too low for too long.”

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The low rates, along with the pandemic, accelerated Americans’ homebuying plans, depleting the number of available homes and this year’s pool of buyers. Combine those factors with mortgage rates more than doubling to 7 percent, and voila: sales slump.

New listings in Manhattan also declined year-over-year in October after a significant increase in September for both co-ops and condos, which Miller attributed to the start of the post-Labor Day market.

In Brooklyn, new co-op and condo contracts fell nearly 60 percent year-over-year. New co-op listings fell 34 percent while new condo listings fell 40 percent. New contracts and listings fell across every price tranche in the co-op and condo markets.

Miller said market conditions will depend on how much more the Federal Reserve pushes up the cost of borrowing. At least one expert believes mortgage rates could rise to 8.5 percent.

“I think it’s going to be interesting to see how this plays out in 2023,” Miller said. “The prognosticators suggest we’re looking at three more rate hikes.”