Manhattan apartment sales plunge in Q4, brokers fear frozen market

Manhattan apartment sales fell by 29% in the fourth quarter, sparking fears of a frozen market in which buyers and sellers stay on the sidelines due to economic and rate fears.

There were 2,546 sales in the quarter, down from 3,560 last year, according to a report from Douglas Elliman and Miller Samuel. The decline was the largest since the third quarter of 2020, during the depths of the pandemic.

Prices also declined for the first time since early 2020, with the median price down 5.5%.

The declines in both sales and prices mark the end of the roaring comeback in Manhattan real estate after the worst days of the pandemic and raise fears of continuing weakness into the new year. Rising interest rates, a weaker economy and a falling stock market, which has an outsized impact on Manhattan real estate, are all likely to weigh on the market this year.

Analysts say their big worry is a prolonged standoff between buyers and sellers — with sellers unwilling to list amidst falling prices and buyers pausing their searches until prices fall further.

“I could see the market moving sideways, with some modest declines in some sectors,” said Jonathan Miller, CEO of Miller Samuel, the appraisal and market research firm. “And it could weaken further if there is the backdrop of recession and job loss.”

Even as prices and sales drop, however, inventory remains tight as sellers hold off on listings. There were 6,523 apartments on the market at the end of the fourth quarter, according to the report, up only 5% from last year but still well below the historical average of around 8,000. Without a large increase in inventory, analysts say prices are unlikely to fall enough to lure back many buyers waiting for discounts. The average discount from initial list price to sales price was 6.5%, up from 4.1% in the third quarter, according to Serhant.

Rising interest rates have also moved more Manhattan buyers into all-cash deals, which accounted for 55% of all sales in the fourth quarter, the highest on record, according to Miller.

As with much of the recovery, the high-end and luxury segment remains the strongest. Median sale prices for luxury apartments — defined as the top 10% of the market — increased 4% in the fourth quarter, compared to a decline in the broader Manhattan market. Median prices for luxury apartments are up 21% compared to 2019, twice the increase as the broader market.

The pipeline of deals in the works or recently signed suggests a slow first quarter. There were only 2,312 contracts signed in the fourth quarter, down 43% over last year, according to Brown Harris Stevens. The quarter was the worst for new contracts signed in the past decade, according to a report from Serhant.

“Contracts signed are a timelier indicator of demand and registered one of the slowest finishes to any year since 2008,” according to Brown Harris Stevens.

Brokers, however, say they remain optimistic and many are predicting…