2023 Q4 Market Report

2023 Q4 New York City Real Estate Market Report

Overview:
The New York City real estate market in Q4 2023 reflected a shifting landscape, with rising interest rates affecting buyer behavior while the rental market remained resilient. Home prices across the boroughs showed slight softening as affordability challenges grew. Despite some slowdown in sales, the luxury sector showed resilience. Meanwhile, the rental market stayed strong, driven by high demand and constrained supply.

Sales Market Highlights:

1. Price Trends:

• Manhattan:
  • The median sale price for condos in Manhattan was $1.25 million, a 0.5% decrease year-over-year but stable compared to Q3 2023.
  • Co-op prices in Manhattan also declined slightly, with the median sale price at $840,000, reflecting a 2% drop compared to Q4 2022.
  • The average price per square foot for condos remained at $1,770, a 1% decline from Q3.
• Brooklyn:
  • Brooklyn’s median condo price stood at $975,000, a slight 1% year-over-year drop.
  • Co-op sales were stable, with the median price at $720,000, relatively unchanged from Q4 2022.

1. Sales Volume:

• Manhattan:
  • The number of transactions in Manhattan fell by 6% year-over-year, with 2,300 sales recorded in Q4 2023. Rising mortgage rates and economic concerns tempered buyer enthusiasm.
• Brooklyn:
  • Brooklyn experienced a 4% decline in sales activity, with 1,700 transactions. Despite this, Brooklyn continued to attract first-time buyers and those looking for more space at a lower price point than Manhattan.

1. Inventory Trends:

• Manhattan:
  • Inventory levels increased slightly, with 7,200 active listings, up 9% year-over-year, giving buyers more options but pressuring prices in certain neighborhoods.
• Brooklyn:
  • Brooklyn saw an 8% increase in listings, with 6,100 units on the market, offering more choices for potential buyers and creating room for negotiation.

1. Luxury Market Resilience:

• The luxury market (properties priced above $5 million) remained relatively strong, with a 5% increase in transactions compared to Q4 2022, despite broader market challenges.
• The average sale price in the luxury segment was $7.7 million, reflecting only a 3% decline year-over-year, as cash buyers remained active.

1. Buyer Demographics:

• International buyers showed renewed interest in prime Manhattan properties, accounting for 15% of luxury transactions, up from 12% in Q3 as travel restrictions eased.
• First-time buyers continued to face affordability challenges, but they represented 12% of overall sales, a slight increase as some took advantage of softer pricing.

Rental Market Highlights:

1. Continued Rent Growth:

• The rental market in Q4 remained highly competitive, with Manhattan median rents reaching $4,950/month, a 3.2% year-over-year increase.
• Brooklyn’s median rent rose to $3,875/month, marking a 4.5% increase compared to Q4 2022.

1. High Demand for Spacious Apartments:

• The demand for larger units (2-3 bedrooms) continued, driven by families and professionals needing home office space.
• The average rent for a 2-bedroom in Manhattan reached $6,100/month, while Brooklyn’s 2-bedroom apartments rented for an average of $4,800/month.

1. Low Vacancy Rates:

• Manhattan’s vacancy rate remained low at 1.6%, while Brooklyn had a 1.8% vacancy rate, highlighting the persistent demand despite rising rents.

1. Landlord Incentives Shrinking:

• Fewer landlords offered concessions, with only 22% of new leases including incentives such as one month free, down from 30% in Q3 2023.

New Developments and Construction:

1. New Project Completions:

• New condo and rental developments were completed in Tribeca, Downtown Brooklyn, and Long Island City, adding over 1,200 units to the market. These new units offered luxury amenities and were aimed at high-end buyers and renters.

1. Pipeline Delays:

• Supply chain challenges and rising construction costs delayed the completion of several projects, pushing delivery dates into mid-2024. Developers remained optimistic about future demand, particularly in Manhattan and Brooklyn’s prime neighborhoods.

Future Forecast:

1. Sales Market Outlook (Q1 2024):

• Sales prices are expected to remain relatively stable in early 2024, with minimal price increases projected as buyers continue to adjust to higher borrowing costs.
• Sales volume may continue to dip slightly, though increased inventory could entice more buyers, especially in Brooklyn and Upper Manhattan.
• The luxury market is likely to remain a bright spot, as cash buyers and international investors continue to show interest.

1. Rental Market Outlook (Q1 2024):

• Rents are projected to rise by another 2% to 3% in Q1 2024 due to strong demand and limited new rental inventory.
• The vacancy rate is expected to remain low, with no significant relief for renters until mid-2024 when additional rental units are delivered.

1. Market Drivers:

• Interest rates will continue to be a major factor affecting buyer decisions, with high rates pushing more buyers into the rental market.
• New development completions in 2024 will provide more inventory, but the supply remains tight in popular neighborhoods.

Key Numbers Recap:

• Median sale price (Manhattan condos): $1.25 million (-0.5% YoY)
• Manhattan median rent: $4,950/month (+3.2% YoY)
• Brooklyn median rent: $3,875/month (+4.5% YoY)
• Vacancy rate (Manhattan): 1.6%
• Sales volume (Manhattan): 2,300 transactions (-6% YoY)
• Luxury market sales: $7.7 million (average sale price, down 3% YoY)

Conclusion:

Q4 2023 was a period of modest price adjustments in the New York City sales market, influenced by rising interest rates and economic uncertainty. However, the luxury market showed resilience, bolstered by international buyers and all-cash transactions. The rental market remained competitive, with record-high rents and low vacancy rates, particularly for larger units. Looking ahead to Q1 2024, the market is expected to stabilize, with slight rent increases and a continuation of current sales trends. The luxury market and rental demand will remain key drivers of activity, while new developments in 2024 are expected to provide some inventory relief for both buyers and renters.