The Federal Reserve’s long-awaited rate cut brought relief to residential real estate last month, but not soon enough to lift Manhattan’s performance in the third quarter.
Condo and co-op sales in Manhattan last quarter fell 3 percent year-over-year, down from 2,900 to 2,800, according to Miller Samuel’s report for Douglas Elliman. Transactions for the two property types remain about 10 percent below the decade average for the period.
Though sales continue to lag in the borough, an uptick in deals is likely on the horizon, as more expected rate cuts are on the horizon and mortgage rates continue to drop or hover at levels lower than the year-ago highs, according to report author Jonathan Miller.
“It looks like we’re gearing up for sales to reach parity with long term trends, but it’s certainly not that now,” Miller said. “There’s a lot of downward pressure on mortgage rates over the next six months, which will boost sales activity.”
That uptick is already reflected in monthly reports on contract activity in the borough. New signed contracts across condos, co-ops and one- to three-family homes rose 19 percent annually in September, marking the third consecutive increase.
“Contract signings over the summer have surged,” Miller said, pointing to the downward trend in mortgage rates ahead of the rate cut as the reason for the momentum.
The Fed’s policy doesn’t directly impact mortgage rates, but they are influenced by some of the same economic factors the central bank considers when deciding whether to lower or raise interest rates. Miller said economists are forecasting another six rate cuts in the pipeline, with two coming up before the end of the year.
Inventory held steady in the third quarter, with active listings dipping from 7,300 last year to 7,200.
Listings have fallen or remained stagnant in Manhattan in five of the last six quarters, unlike other nearby markets where inventory was decimated after the pandemic buying frenzy, Miller said. Manhattan managed to maintain a relatively normal level of inventory compared to other markets, with listings sitting just one percent higher than the 10-year average for the third quarter.
But Miller cautioned that inventory levels may dip lower in the coming months, as sales activity is poised to outpace listings coming on the market.
Cash deals accounted for 56 percent of sales last quarter, marking the lowest share of transactions in two years. The falling metric comes after cash purchases reached decade highs in 2023 as elevated mortgage rates sidelined buyers who use financing.
“This dilution in cash is representative of the lower two-thirds of the market, not so much the high-end market, which tends to be heavy users of cash,” Miller said, adding that lower mortgage rates are likely “teeing the market up” for more buyers in the fall.
Just under 10 percent of home sales in the borough resulted in bidding wars last quarter — the highest share since 2017. Miller attributes the uptick to overpriced listings on the market, saying “the correctly priced properties are where the bidding wars are happening.”
“When a broker tells you that inventory is tight, they’re really not talking about the numbers. They’re talking about the inventory that’s priced correctly,” Miller said. “This is evidence that the supply is priced slightly above current market conditions.”
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