A New York City broker’s cell phone can be a good indicator of how the residential market is trending.
The buzzing, beeping and chirping typically quiet down as the city empties out in the leadup to Labor Day weekend.
But this year, the phone just kept ringing for Serhant’s Ravi Kantha.
“Typically the last two weeks of August are completely quiet, but that was not the case,” said Kantha, adding he’s received a stream of inquiries in recent weeks from buyers who had previously been out of the market.
While every broker can hit the occasional hot streak, data show the end-of-summer slowdown wasn’t so slow, and could be a good sign for a fall oasis after a long market dry spell.
Beyond the numbers, multiple factors point, for once, in the same direction.
Mortgage rates have fallen to their lowest level in over a year and may keep sliding if the economy falters. The stock market has turned out money to spend but has not proven so resilient to deter investors from cashing out.
Taken together at a time — late September through early November — historically known for a natural uptick in activity, they can cast an optimistic shade on the residential market.
As ever, it’s not unabashed good news. Rates, while down relative to the last year, remain elevated compared to the past decade, and it’s unclear how much further they may fall. (The expected September rate cut has already been factored into the recent drop.)
Inventory also remains a problem. While hungry buyers have started jumping back into the market, available units have not kept pace.
But as appraiser Jonathan Miller, the preeminent prognosticator of New York’s market, explained, it’s hard to deny the good feelings permeating the city.
“It’s a better vibe,” Miller said.
It’s the economy, stupid
Summer ended with a much-needed bang. After a year of anemic growth rates compared to an already-down 2022, contracts in July and August exploded, growing a combined 43 percent year-over-year, according to Douglas Elliman’s monthly reports for Manhattan and Brooklyn.
The numbers are not just bouncing back from a nadir last year, but are often surpassing where the market was before 2020. In Brooklyn, one- to three-family home contracts were up 240 percent from August 2019 and co-op contracts were up 132 percent.
A presidential election usually inspires predictions of a market slowdown, although data for that is shaky at best and brokers previously told The Real Deal they don’t expect it to amount to much more than a blip in the market.
Instead, falling mortgage rates are expected to be the number one catalyst of renewed activity. The average 30-year fixed mortgage rate, hovering just above percent, started September at its lowest point since May 2023.
While New York City might be one of the places least responsive to interest rates — more than half of deals done in Manhattan in April were cash — the lower end of the market still can influence activity across the board on a psychological level.
Serhant’s Jim Hayes, who leads sales at Quay Tower in Brooklyn Heights, attributed the unusual “August speed up” to the pressure from buyers reentering the market.
“Buyers that are coming in, and their brokers, feel that the market is picking up, so there’s a sense of urgency,” Hayes said.
Melissa Cohn, a regional vice president at William Raveis, said her office has been fielding more calls since rates fell last month.
“I continue to hear from people that I haven’t heard from in a year or two,” Cohn said. “I had a client that reached out to me…the last time I spoke to her was in 2022.”
Mortgage rates still have a ways to go before “the floodgates open,” according to Cohn. Still, continued weak jobs reports or other recessionary indicators could push the Federal Reserve to take more drastic measures.
Elliman’s Elena Sarkissian, who leads sales at 108 Leonard in Tribeca, also sees the stock market’s success earlier this year as incentivizing newly wealthy buyers to now pivot from equities to real estate.
“A lot of tech money, a lot of people did well in the stock market,” Sarkissian said. But after nearly seven months of strong returns, end-of-summer volatility has people “thinking of hard asset plays,” she added.
Inventory squeeze
Contracts have been climbing rapidly in the past several months, but listing growth fell short of the same lofty targets, growing just 19 percent compared to last year.
Elliman’s Jessica Chestler and Ben Jacobs have seen buyers getting antsy as they perceive the competition heating up, with one coming up to meet the asking price of an Upper West Side unit they had been eyeing all summer.
“There’s concern from a lot of our buyers that if they don’t get in sooner or later, they’re going to miss out on the lows in the market that we’ve seen over the last year and a half,” Jacobs said.
Some of the imbalance in supply and demand growth may even out, as Realtor.com senior economist Ralph McLaughlin pointed out that supply typically lags behind demand.
But new development, which can have a 12- to 18-month runway to come online, could turn into a seller’s market quickly. According to Marketproof’s monthly report, August new development contracts were up 12 percent year-over-year while inventory was essentially flat.
“In a lot of the better projects, I can see developers slightly increasing prices to potentially negotiate a little bit and maybe easing off on some of those buyer incentives,” said Stephen Kliegerman, president of Brown Harris Stevens Development Marketing.
However, McLaughlin said the laws of supply and demand, which would dictate a price run-up if supply remains limited, may be constrained by how much money is in people’s bank accounts.
“I can’t see home prices growing much more than maybe five, six, seven percent over the next couple years,” McLaughlin said. “Prices go up because people bid more for homes, but they can’t bid up for homes any more than their income allows.”
The market also already seems to be responding to the call for more inventory. UrbanDigs co-founder John Walkup said he’s seen post-Labor Day listings up 200 percent from the previous week.
“I think we’re sort of getting over that curve of listings coming on, which means sellers are ready to deal,” Walkup said.
Read more
Residential
New York
Shifting rates and herd mentality: How NYC traded a slow spring for a hot summer
Residential
New York
Where the pain is: Resi slump hits these NYC markets hardest
Commercial
New York
NY rents notch April record, signaling another hot summer ahead