While the market seemed to be gaining momentum in early 2023 after a very slow second half of 2022, various economic factors (stock market fluctuations and distress at banks) dampened transaction activity starting in early March. As rising rates made borrowing more costly, many sellers refused to budge and buyers were left waiting for price drops that never came. Though sellers have finally begun to react to diminished buyer demand by lowering prices and increasing negotiability, until something really gives, this trend will likely continue through at least the first half of 2023. 

Even with new listings lagging compared to last year, longer time to contract and fewer signed contracts caused Manhattan total supply to increase. However, current inventory is still 13% below historical first quarter averages, and the lowest for a first quarter since 2017. Inventory levels varied based on price-point and size: there were fewer lower-end, smaller apartments on the market as buyers gravitated toward these units, leaving more options on larger, over $1M apartments.

Prices declined for the second consecutive quarter with median price at its lowest point since Q2 2020 and average price at a two-year low. However, some of this could be attributed to an increased share of sales in the lower-end of the market (smaller homes and co-ops). While demand for these smaller, lower-priced home saw a marked decline during the immediate post-pandemic recovery as buyers sought larger spaces and took advantage of low mortgage rates to stretch their budgets, sales under $1M comprised 50% of Manhattan closings in the last quarter, their highest market share in three years.

The Brooklyn market was affected by the same factors last quarter, albeit far less noticeably. Higher mortgage rates and overall economic concerns have cooled the market, but the borough continues to be teflon-tough in the most in-demand neighborhoods.

While both total sales and contracts signed were down compared to last year, which was an outlier, both figures were on par with pre-pandemic Q1 historical averages (2010-2020), indicating that despite massively constricted inventory, Brooklyn buyers are still pushing to get deals done. 

Brooklyn median price decreased 7% year-over-year last quarter making Q1 2023 the lowest median price we’ve seen in Brooklyn in the last ten quarters, but this reflects more of a shift in the types of sales rather than a drop in prices. The majority of sales were below $750K with buyers gravitating toward smaller homes, and resale condo and co-op median sale prices actually increased year-over-year; only new development fell. 

The average number of inquiries received by for-sale listings on StreetEasy was 9% above its pre-pandemic level in February indicating strong buyer interest, However, with affordability as a top concern, NYC buyers have shown patience in finding a home within their budget.

After a tumultuous few years, many hoped that the housing market would improve this spring. No such luck according to Jonathan Miller, a leading appraiser. 

“This is the year of disappointment... The sellers aren’t going to get their 2021 prices, and buyers aren’t going to get a substantial savings on the price." 

Mayor Adams outlined his plans to create more affordable housing, including controversial ideas to convert offices to apartments and a “modern-day, almost-SRO concept” of shared dormitory style living.

Recovery is lagging for NYC's commercial real estate sector. According to New York Fed, “While the residential rental market has bounced back, the retail and office markets have remained slack - largely due to the shift to remote work and online shopping.”