Manhattan real estate sales plunge 38%, but cash transactions hit an all-time high

Real estate sales in Manhattan fell 38% in the first quarter, as buyers and sellers battled over prices and mortgage rates remained volatile, according to new reports.

Total sales fell to $4.4 billion in the quarter, with 2,242 condos and townhomes sold, compared to 2,546 sales in the first quarter of 2022, according to a report by Douglas Elliman and Miller Samuel. The average sale price fell 5% to $1.95 million and the median sale price fell 10% to $1.075 million, according to the report.

The decline in sales and prices follows a 29% decline in the fourth quarter, and indicates that the country's largest real estate market is recovering after a post-pandemic boom in prices and demand. The big question for brokers, buyers and sellers is where the new "bottom" will be in Manhattan.

"I think we will see a seasonal increase in the spring," said Jonathan Miller, CEO of Miller Samuel, the appraisal and research firm. "But some things depend on whether the Fed keeps interest rates where they are."

Realtors say the biggest challenge for deals is the wide gap between buyer and seller price expectations. Relatively low levels of inventory, or unsold listings, mean buyers still don't have much choice in Manhattan. There were 6,996 homes on the market in the first quarter, slightly below the five-year average of about 7,200, according to Miller Samuel.

"There is still a disconnect between buyers and sellers," said Jason Haber at Compass. "Sellers don't lower prices left and right to make deals. They have confidence. They feel like 'if I lose a buyer there is another down the road waiting.' There is no panic to sell, or to think that they have to leave now."

Sellers have cut prices, but not enough for today's bargain shoppers. The average discount from the initial list price to the selling price in the first quarter was 7%, compared to 5% in the fourth quarter, according to Serhant. "Weary buyers were still in a strong position to negotiate," according to Corey Napier, director of research at Serhant.

Buyers still fear overpaying in the face of a potential recession, volatile stock market and banking crisis. Many brokers say buyers have been calling for months with expectations of price reductions of 20% or more - only to be disappointed.

"The buyers in the last three quarters have been sitting back, waiting for massive reductions and they are not coming," said Noble Black of Douglas Elliman. "And I don't think this big reduction will come."

As Frederick Warburg Peters, president of Coldwell Banker Warburg, said in his first quarter report, "it appears that the major declines in prices are behind us, and property costs have leveled off."

Bidding and interest remained particularly strong at the high end. The share of luxury sales — or deals in the top 10 percent of the market by price — that resulted in bidding wars rose to a record high of more than 11 percent in the quarter, Miller said. Realtors say wealthy buyers generally prefer to pay cash and are therefore less affected by higher mortgage rates.

Overall, cash transactions rose to a record 57 percent of all sales in the quarter, Miller said. At the high end of the market, three-quarters of all sales over $5 million were all cash.

Brokers say they see signs that the second quarter will be stronger - especially as the luxury market improved during the first quarter. Sales contracts for properties priced at $4 million or more rose from an average of 16 transactions per week in January to 32 transactions per week in March, according to Olshan's report.

Still, much depends on the future of interest rates and the general economy. Because New York City is home to so many finance-related buyers and sellers, the stock market's performance may also shape Manhattan's housing market this spring and summer.

"Based on what I'm seeing now, we're getting to a healthier place in the spring," Black said. "It's not a seller's market, but it gets busier every month."