Manhattan is now a 'buyer's market' as real estate prices fall and inventory rises

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The declines in house prices in Manhattan are the result of an increase in the inventory of houses for sale, which also take longer to sell.

The gap between the expectations of the buyer and the seller is getting smaller, and more deals are being closed.

High rents in Manhattan also help sales as many potential buyers who have been waiting for the rental market finally decide to buy.

Manhattan is becoming a buyer's market as home prices fell and inventory rose in the second quarter of 2024, according to new reports.

The average real estate sale price in Manhattan fell by 3% to more than $2 million, according to a report by Douglas Elliman and Miller Samuel. The median price fell 2% to $1.2 million, and luxury home prices fell for the first time in more than a year, according to the report.

The price drops are the result of the increase in the inventory of apartments for sale, which also takes longer to sell. There are now more than 8,000 apartments for sale in Manhattan, which is higher than the 10-year average of about 7,000, according to Jonathan Miller, CEO of Miller Samuel, an appraisal and research firm.

Manhattan now has a 9.8-month supply of apartments for sale, which means it will take 9.8 months to sell all the apartments on the market without new listings, according to Brown Harris Stevens. "Any number above 6 months tells us there is too much supply and we are in a buyer's market," according to the Brown Harris Stevens report.

The drop in prices and the increase in the number of unsold apartments in Manhattan stand in contrast to the national real estate landscape, where continued tight supply continues to keep prices high. Real estate brokers and analysts say strong prices in post-Covid Manhattan have become unsustainable, and both buyers and sellers are finally succumbing to a higher interest rate environment.

"The decision of buyers and sellers is weakening," Miller said. "At a certain point, they can only wait so long before they feel they have to make a move."

With the narrowing of the gap between the expectations of the buyer and the seller, more deals are closed. There were 2,609 sales in the second quarter, a 12% increase over last year, according to a report by Douglas Elliman and Miller Samuel. This marked the first sales recovery in two years.

"As the second quarter began, the real estate market in New York woke up from the depression in which it languished in the first quarter of 2024. Deals began to emerge in all price categories," said Frederick Warburg Peters, president emeritus of Coldwell Banker Warburg.

High rents in Manhattan also continue to help sales. The average rent for an apartment in May was still above $5,100 per month, and rents tend to rise in late summer. Many potential buyers who have been waiting for the rental sales market are finally deciding to buy, hoping that interest rates will start to drop in late 2024 or early 2025.

"If people were sitting on the fence, the high rents may have helped push them into the sales market," Miller said.

Still, mortgage rates have a more muted effect on real estate in Manhattan than the rest of the country, since most sales in Manhattan are in cash. In the second quarter, 62% of transactions were all cash.

While prices have fallen in all sectors of the Manhattan real estate market, the high end is among the weakest, as the wealthy hold off on purchases until after the uncertainty of the election. Median sales prices in the luxury segment – ​​or the top 10% of the market – fell 11% in the second quarter, according to Miller Samuel. The listing stock of luxury apartments increased by 22%.

"With the high end, this weakness could be the start of a trend or just a one-off," Miller said. "We'll have to see what happens in the second half."