2022 Q3 Market Report

2022 Q3 New York City Real Estate Market Report

Overview:
In the third quarter of 2022, the New York City real estate market experienced a notable shift as rising interest rates and economic uncertainties began to impact buyer sentiment. While the overall market showed signs of resilience, with stable pricing in many areas, there was a marked slowdown in sales volume, particularly among first-time buyers and lower-priced segments. The rental market remained strong, driven by continued demand and a shortage of available units, leading to significant rent increases across the city.

Sales Market Highlights:

1. Price Trends:

• Manhattan:
  • The median sale price for condos in Manhattan was $1.25 million, reflecting a 3% increase compared to Q3 2021. This uptick was fueled by demand for high-end properties and competitive bidding in sought-after neighborhoods.
  • The average price per square foot for condos reached $1,750, representing a 2.5% increase year-over-year.
  • Co-op prices in Manhattan saw a modest increase, with the median sale price at $835,000, up 1.5% year-over-year.
• Brooklyn:
  • The median condo price in Brooklyn was $950,000, marking a 4% increase compared to the previous year.
  • Co-op prices in Brooklyn remained steady, with the median sale price at $720,000.

1. Sales Volume:

• Manhattan:
  • Sales volume declined by 15% year-over-year, with 3,200 transactions recorded in Q3 2022. Rising interest rates began to create affordability challenges, leading to decreased activity among potential buyers.
• Brooklyn:
  • Brooklyn experienced a 10% decrease in sales volume, totaling 2,600 transactions. While the borough remained appealing due to relatively lower prices compared to Manhattan, rising costs affected buyer activity.

1. Inventory Trends:

• Manhattan:
  • Inventory levels increased by 12%, resulting in 5,500 active listings by the end of Q3. More listings provided buyers with additional options, although many remained cautious due to economic conditions.
• Brooklyn:
  • Brooklyn’s inventory saw a 10% increase, reaching 4,900 active listings. While this provided more choices for buyers, the competition remained strong for well-priced properties.

1. Luxury Market Performance:

• The luxury market (properties priced above $5 million) remained robust, with an average sale price of $7 million, up 4% year-over-year.
• Cash buyers comprised 42% of luxury transactions, demonstrating sustained interest despite broader economic uncertainties.

1. Buyer Demographics:

• First-time buyers accounted for approximately 12% of transactions, reflecting challenges faced in a rising interest rate environment.
• All-cash buyers represented a significant portion of sales, particularly in the luxury segment, where they made up 39% of overall transactions.

Rental Market Highlights:

1. Rent Growth:

• The median rent in Manhattan surged to $4,400/month, a 7% increase year-over-year. Strong demand for rentals continued as many potential buyers opted to remain renters amid rising interest rates.
• Brooklyn’s median rent climbed to $3,300/month, marking an 8% increase from Q3 2021.

1. Demand for Larger Units:

• The average rent for a 2-bedroom apartment in Manhattan reached $5,600/month, while in Brooklyn, it was $4,200/month. Demand for larger units remained high as renters sought more living space.

1. Low Vacancy Rates:

• Manhattan’s vacancy rate dropped to 2.1%, while Brooklyn’s vacancy rate stood at 2.3%, indicating a tight rental market with limited supply.

1. Landlord Concessions:

• Landlord concessions were offered in 40% of new leases, down from 50% in Q2 2022, suggesting strengthening demand for rental units as market conditions improved.

New Developments and Construction:

1. New Condo and Rental Units:

• Over 1,500 new units were delivered in neighborhoods such as Hudson Yards, Long Island City, and Downtown Brooklyn during Q3 2022, catering to both luxury buyers and renters.

1. Construction Delays:

• Labor shortages and supply chain disruptions continued to delay several projects, pushing completion dates into late 2022 and 2023. This contributed to supply constraints in both the sales and rental markets.

Future Forecast:

1. Sales Market Outlook (Q4 2022):

• Sales prices are expected to stabilize, with slight downward pressure on lower-priced segments as affordability challenges persist.
• Sales volume is anticipated to decrease further as buyers adopt a cautious approach amid rising interest rates and economic uncertainty.

1. Rental Market Outlook (Q4 2022):

• Rents are projected to continue rising by 2-3% in Q4, driven by strong demand and limited availability of rental units.
• Vacancy rates are likely to remain low, as competition for rental units continues to be strong.

1. Key Market Drivers:

• Interest rates will remain a significant factor affecting 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 persist in the near term.

Key Numbers Recap:

• Median sale price (Manhattan condos): $1.25 million (+3% YoY)
• Manhattan median rent: $4,400/month (+7% YoY)
• Brooklyn median rent: $3,300/month (+8% YoY)
• Vacancy rate (Manhattan): 2.1%
• Sales volume (Manhattan): 3,200 transactions (-15% YoY)
• Luxury market average sale price: $7 million (+4% YoY)

Conclusion:

Q3 2022 highlighted the ongoing adjustments within New York City’s real estate market in response to rising interest rates and economic uncertainties. While sales activity showed signs of slowing, particularly among first-time buyers, prices remained stable, especially in luxury segments. The rental market continued to thrive, with increasing rents and low vacancy rates driven by strong demand. Looking ahead, the market faces challenges related to interest rates and affordability, but continued demand for rental properties suggests that the rental sector will remain robust in the coming months.