2022 Q4 Market Report

2022 Q4 New York City Real Estate Market Report

Overview:
The fourth quarter of 2022 demonstrated a resilient New York City real estate market amid rising interest rates and inflationary pressures. While the sales market saw some softening in demand, especially among first-time buyers, prices remained relatively stable, particularly in high-demand neighborhoods. The rental market experienced significant growth, driven by strong demand and limited supply, leading to record-high rental prices across the city.

Sales Market Highlights:

1. Price Trends:

• Manhattan:
  • The median sale price for condos in Manhattan reached $1.27 million, a 1.5% increase compared to Q4 2021. This stability was supported by ongoing demand for luxury properties and competitive bidding in desirable neighborhoods.
  • The average price per square foot for condos was $1,780, reflecting a 2% increase year-over-year.
  • Co-op prices in Manhattan showed a modest increase, with the median sale price at $850,000, up 1% year-over-year.
• Brooklyn:
  • The median condo price in Brooklyn was $980,000, marking a 2% increase compared to the previous year.
  • Co-op prices remained stable, with the median sale price at $730,000.

1. Sales Volume:

• Manhattan:
  • Sales volume decreased by 10% year-over-year, with 2,900 transactions recorded in Q4 2022. The decline was influenced by rising mortgage rates, which led to affordability concerns among buyers.
• Brooklyn:
  • Brooklyn saw a smaller decrease in sales volume, down 5%, with 2,300 transactions. Buyers continued to be attracted to more affordable options compared to Manhattan.

1. Inventory Trends:

• Manhattan:
  • Inventory levels increased by 10%, resulting in 6,000 active listings by the end of Q4. While more options were available, the market remained competitive, particularly for well-priced properties.
• Brooklyn:
  • Brooklyn’s inventory rose by 8%, reaching 5,300 active listings. Increased supply provided more choices for buyers, but strong demand kept prices steady.

1. Luxury Market Resilience:

• The luxury market (properties priced above $5 million) continued to thrive, with an average sale price of $7.5 million, up 3% year-over-year.
• Cash buyers accounted for 45% of luxury transactions, demonstrating strong interest despite economic uncertainties.

1. Buyer Demographics:

• First-time buyers represented 10% of transactions, a decline from 12% in Q4 2021, as rising interest rates made entry-level properties less accessible.
• All-cash buyers played a significant role, particularly in the luxury segment, where they comprised 38% of overall transactions.

Rental Market Highlights:

1. Record Rent Growth:

• The median rent in Manhattan surged to $4,700/month, a 9% increase year-over-year. The rental market was heavily influenced by a strong recovery in demand post-pandemic.
• Brooklyn’s median rent climbed to $3,600/month, marking a 10% increase from Q4 2021.

1. Demand for Larger Units:

• The average rent for a 2-bedroom apartment in Manhattan reached $5,800/month, while in Brooklyn, it was $4,500/month. Demand for larger units remained strong as tenants sought more living space.

1. Low Vacancy Rates:

• Manhattan’s vacancy rate dropped to 1.9%, while Brooklyn’s vacancy rate stood at 2.1%, reflecting tight rental market conditions with limited supply.

1. Landlord Concessions:

• Landlord concessions were offered in 35% of new leases, down from 50% in Q3 2022, indicating strengthening demand for rental units.

New Developments and Construction:

1. New Condo and Rental Units:

• Over 1,800 new units were delivered in neighborhoods like Hudson Yards, Long Island City, and Downtown Brooklyn during Q4 2022, catering to both luxury buyers and renters.

1. Construction Challenges:

• Labor shortages and supply chain disruptions continued to delay construction on various projects, pushing completion dates into 2023. This contributed to the tight supply in the market.

Future Forecast:

1. Sales Market Outlook (Q1 2023):

• Sales prices are expected to stabilize, with potential minor declines in lower-priced segments as rising interest rates continue to impact buyer affordability.
• Sales volume is anticipated to decrease further as economic uncertainty leads buyers to adopt a wait-and-see approach.

1. Rental Market Outlook (Q1 2023):

• Rents are projected to rise by 2-3% in Q1, driven by strong demand and limited inventory.
• Vacancy rates are likely to remain below 2%, as competition for rental units continues to be strong.

1. Key Market Drivers:

• Interest rates will play a crucial role in shaping buyer behavior, with higher rates pushing more potential buyers to remain in the rental market.
• New developments are expected to provide some relief to inventory shortages, though delays may continue to hinder supply in the near term.

Key Numbers Recap:

• Median sale price (Manhattan condos): $1.27 million (+1.5% YoY)
• Manhattan median rent: $4,700/month (+9% YoY)
• Brooklyn median rent: $3,600/month (+10% YoY)
• Vacancy rate (Manhattan): 1.9%
• Sales volume (Manhattan): 2,900 transactions (-10% YoY)
• Luxury market average sale price: $7.5 million (+3% YoY)

Conclusion:

Q4 2022 showcased the resilience of New York City’s real estate market despite rising interest rates and inflation concerns. While sales activity softened, prices remained stable, particularly in luxury segments. The rental market experienced robust growth, with record-high rents and low vacancy rates, as strong demand continued to outpace supply. Looking ahead, the market is expected to face challenges related to interest rates and affordability, but continued demand for rental properties suggests that the rental sector will remain strong in the coming months.