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Rents across the city remain at record highs, but the Manhattan real estate sales market appears to be slowing down, with climbing interest rates and recession fears driving buyers and sellers to hold out in Hell’s Kitchen according to a new analysis by realtors Douglas Elliman.

This W42nd Street condo in the Orion building is listed at $950,000, a $99,000 cut since it first went on the market last May. Photo: StreetEasy

The real estate firm’s report on the fourth quarter of 2022 said median Manhattan home sale prices dropped 5.5 per cent, the first drop since before COVID-19. In contrast, median rental prices rose 2.1 percent in the final three months of 2022.

The analysis, which was first reported by CNBC, shows that the number of condo sales in Manhattan dropped 29 percent in the final quarter of 2022 compared to the previous year. People with existing mortgages are unwilling to move, because it would expose them to higher rates. It both decreases the volume of sales, leading to properties sitting on the market for longer, and prompts people trying to sell to cut the price.

This townhouse in The Link on W52nd Street has also been cut in price, down by more than $800,000 since it went on sale last April. Photo: StreetEasy

“Brokers worry about what some are calling a deep freeze,” said CNBC’s Robert Frank. “That’s where sellers don’t list because prices are soft, and buyers are waiting for more dramatic price cuts — so they’re just sitting on the sidelines. Low inventory is also holding back sales. The number of unsold apartments rose a little bit — about 5 percent, but still well below the normal levels.” 

In Hell’s Kitchen, W42ST found numerous properties to support the citywide trend of apartments taking months to sell and owners cutting prices, including:

A 57th floor apartment at 322 W57th Street between 8th and 9th Avenues which has been cut twice in price to $6,690,000. Photo: StreetEasy

The “freeze” has also led to an all-time high in cash purchases. “The market share of cash buyers reached a record 55.2%, the highest in nine years of tracking, reflecting the high mortgage rate environment,” the realtor reported.

The average Manhattan home sale in October, November and December was $1,940,565, down 0.7% on the previous three months and 0.4% on the same three months in 2021. And the median sales price—the point at which 50% of sales are either below or above— was $1,100,500, down 5.5% year over year. That was the first decline since the second quarter of 2020, the official beginning of the “pandemic era” in the property market.

The penthouse at One Waterline Square has been on sale since October 2021, but its price remains unchanged at $27 million. Photo: Evan Joseph

The decrease, the realtors said, was fueled by a significant fall in the cost of sales in new developments. The average new development sale was $1,981,794 in the last quarter, compared to $2,223,500 in 2021, a fall of 10.9% in a year. But at the luxury end of the market, which Douglas Elliman says begins at $3,95 million, prices are still rising. The average luxury sale was $8,058,356, up 0.4% on the previous quarter and 3.6% on the previous year.

Despite fears over a slowdown in purchases, analysts expect cash sales and foreign buyers to keep the industry moving. And there may be hope yet for worried Manhattanites wanting to rent, rather than buy, their own slice of the Big Apple.

Business Insider reported that the pandemic  “Zoomtown” boom —  in which newly remote workers flocked to lower cost of living suburbs and smaller cities — could eventually drive prices back down in the city. Previously less-populated areas like the Sun Belt have seen dramatic increases and a need for expanded housing, and the same regions are easier targets than New York City for developers due to more lenient zoning laws, smaller regulatory fees and a lower cost of land.

While the perfect storm of zoning conflicts, empty rent-stabilized apartments and warehoused units may still threaten the city’s housing market, “Zoomtown” build outs could still have a positive effect on the city’s real estate pickings, bringing inflation-adjusted rents down by as much as 3.7 percent according to Business Insider. Senior economist Jeff Tucker of Zillow told them: “This spike in prices in the short term should be followed by moving toward a new equilibrium, which does mean a bit of a cooldown in housing costs.” As every New Yorker who has to pay rent knows, every penny counts! 

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