Homebuyers are flocking to Manhattan despite rising mortgage rates, according to a new analysis, as sales reached a record $7.3 billion within the first months of the year.
The number of sales in the New York borough reached 3,585 during the first quarter of 2022, up 45.9% year on year, according to Miller Samuel and Douglas Elliman report. That increase in sales was up 48.9% from pre-pandemic levels, marking the third consecutive quarter of record high sales.
“What we have seen is there are diehard New Yorkers. They want to be here. They've been here for a long time. They used the COVID discounts to be able to trade up. They bought their forever homes. They're renovating them,” Kirsten Jordan, Douglas Elliman real estate advisor and ‘Million Dollar Listing’ cast member, told Yahoo Finance Live. “We are lucky here, because we have a lot of different pools of buyers that are interested in our product.”
Buyers face stiff competition
Would-be homebuyers aren’t giving up easily, even as record low inventory levels and surging prices paint a historically competitive spring market. An increasing number of buyers are moving back to cities even as mortgage rates exceed 5%, according to the survey.
Demand continues to be red-hot in the city, as listing inventory declined for the third consecutive quarter by 4.4% to 6,906, according to the Miller Samuel and Douglas Elliman analysis. At the same time, the months of supply — or the number of months it takes to sell all listing inventory at the current sales rate — was 5.8 months, 34.1% faster than last year and up 23.7% before the pandemic.
As housing prices surged — with the median sales prices rising 10.7% year over year — buyers had to act quickly, resulting in a fast-moving market pace. But Manhattan isn’t the only place where buyers are facing a tough time snagging a listing. Buyers are facing competition nationwide — although this may soften as rates continue to rise.
“Outside of New York City and outside of these big cities, what we're seeing is there is inventory shortage and, of course, the mortgage rates rising are making the buyers have to reshuffle and think about what they're going to do,” Jordan said. “We are seeing buyers rushing to try to make purchases, so that they can lock into these rates before they go up any higher.”
Still, rising rent prices and affordability concerns are causing some buyers to pause and really think about what their budget can take.
“A lot of these properties were getting 20 bids, and now they're getting five bids,” Jordan said. “So it's still a strong market, it's just not blistering crazy hot.”
Housing prices are likely to increase until 2023
Manhattan homebuyers aren’t catching much of a break when it comes to their budget.
The average price in apartments in Manhattan jumped 19% from the first quarter of last year to just above $2 million. According to the analysis, the market share of high-end sales remained strong, with sales at or above the $4 million threshold making up 11.1% of all sales – the highest share in two years.
Sales around the $2 million mark increased 30.2% for the highest market share on record, while the average price per square foot increased 16.5% to $1,616 compared with a year ago. Cash buyers also held the upper hand, holding 46.9% of sales for apartments under $500,000 – while cash buyers for sales above the $5 million threshold accounted for 56.3% of all sales.
According to Jordan, record-low inventory levels and potential rate hikes are going to push more people to lock in rates. Depending on the market, it’s likely that housing prices will continue to increase until 2023, Jordan said. But there is one silver lining.
“So I do see everything stabilizing and normalizing a little bit more. We're seeing it slowly. But I think that this talk of things falling off a cliff over the next six months are not what we're going to see,” Jordan said. “We're definitely going to see, I think, a softer landing.”
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.