Prices of Manhattan condos and co-ops rose at the end of 2023 for the first time in over a year, at a time when mortgage rates were at their highest levels in 23 years. But for many buyers, rates didn’t even matter: A record high number of buyers purchased their home in all-cash deals.
Moreover, prices rose in the last three months of the year even as sales and inventory dropped.
The median sale price of all co-ops and condos was $1,156,391 in the fourth quarter of 2023, up 5.1% from the year before, marking the first year-over-year increase since the third quarter of 2022, according to a report from brokerage Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants.
Housing inventory since the pandemic has dropped 3.5% in Manhattan, but prices have remained high. They’ve surged 15.8% from the fourth quarter of 2019 and, besides some recent softening, there has not been a major price correction to pre-pandemic prices, said Jonathan Miller, president and CEO of Miller Samuel.
“Bottom line is that prices are generally rising, they aren’t soaring, but they are clearly rising after more than a year of declines largely attributable to the Federal Reserve’s pivot two years ago where mortgage rates rose at their fastest upward rate in decades,” Miller told CNN in an interview, referring to the central bank’s aggressive rate-hiking campaign to battle inflation.
Cash sales surged to over two-thirds of all sales in the fourth quarter, the most on record, according to the report.
With mortgage rates surging over the past year, transactions by cash buyers were up 17.6% year over year in the fourth quarter to 68%. Buyers who financed their loan with a mortgage fell to a record low: 32%.
The average proportion of Manhattan cash buyers — going back to 2014 — has been 50%, Miller said.
Overall sales were down, dropping 5.5% from a year ago and 15.7% from the third quarter of 2023.
But sales of high-end properties — those that sold for over $5 million — climbed.
These more expensive homes pushed the average price of all condos and co-ops over $2 million, to $2,013,963, up 3.8% from a year ago and up 3% from the third quarter.
The increase in year-over-year prices came primarily from the growth in price of larger apartments — four bedrooms or more — and the smallest apartments, studios.
The median price for a studio apartment in Manhattan was $498,000, which was up 1.9% from a year ago. The median price for an apartment with four bedrooms or more was $6.650 million, up 9.9% from a year ago.
Other sized apartments saw their median prices drop from a year ago. The price of one-bedroom apartments was $830,000, down 4.6% from a year ago. Two-bedroom apartments had a median price of $1.550 million in the fourth quarter, down 6.1% from the year before. The median price of a three-bedroom apartment was $2.875 million, which was down 8.7% from the year before when it was over $3 million.
The median sales price for a luxury property — which is defined as the upper 10% of all co-op and condo sales by price — was $6.125 million. The price increased annually for the third time in a row and was significantly above pre-pandemic levels.
Newly signed contracts for co-ops and condos in Manhattan increased in December, putting a little spring in the market’s step as mortgage rates fell sharply over the past month, according to a separate Douglas Elliman and Miller Samuel report on forward-looking signed contracts for sales, as opposed to closed sales.
In addition to the lower rates, signed contracts rose because inventory for all property types increased in December at the quickest rate since March 2022.
Newly signed contracts for condos and co-ops above the $1 million threshold grew compared to the prior year.
At the end of October, the average rate for a 30-year, fixed-rate mortgage was 7.79%, according to Freddie Mac. The typical rate has fallen for nine weeks in a row since then. As of last week, the average rate was 6.61%.
At its December policy meeting, the Federal Reserve not only held its benchmark lending rate steady but suggested it would look for rate cuts in 2024. That sent mortgage rates lower.
“The growth area in sales isn’t going to be coming from more cash,” said Miller. “It will come from more people financing a purchase because rates are coming down. That’s been the challenge for the past year and a half.”
This narrowing of the gap between the likely lower mortgage rate for homeowners and the prevailing market rate means selling and buying a new home is becoming less painful than it was when rates were above 7%. More sellers putting their homes on the market adds inventory to meet pent-up demand and gives buyers a greater selection of homes.
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