Predictions For 2024 Sales Market

David Goldsmith

All Powerful Moderator
Staff member

5 Things To Watch For In Manhattan Real Estate Heading Into 2024​

John Walkup

Manhattan, the heart of New York City, is a focal point of global real estate interest, and its dynamic market reflects various economic, social, and geopolitical factors. Given its relative importance, here are five critical areas or factors poised to influence the Manhattan real estate market in the upcoming months. Through a combination of data-driven insights and market trends, this piece attempts to provide some indications of the potential directions the Manhattan market might take in the months ahead.

No. 1: Interest and Mortgage Rates

With the interplay between the Federal Reserve's target rate, the 10-year Treasury yield, and mortgage rates, significant shifts in these rates can impact the Manhattan real estate market. Notice the sizable positive move in rates compared with the downward move in contracts signed. While the correlation between mortgage rates and demand is negligible, the historically significant rate movement has certainly forced buyers to reexamine affordability questions.


What we’re watching: If the Fed Funds futures, as they stand today, are correct, and the Fed starts to cut rates in May or June next year, we may start to see a decrease in mortgage rates. Such a scenario can potentially boost demand, especially in a market that is not oversupplied, as present expectations about future costs become more manageable.

No. 2: The Strength of the General Economy

The S&P 500, often seen as a barometer for the general economy, provides insights into the health and direction of the broader market. If interest rates stabilize or decline, the stock market might experience another leg up, potentially driving more demand in the real estate market. A buoyant stock market often signals increased consumer confidence, which usually translates to more activity in the real estate sector. Despite rising rates and recessionary threats, the S&P 500 has shown remarkable adaptability since January 2022, suggesting a resilience that underscores the US economy.

What we’re watching: If the economy manages to avoid a much-predicted recession and consumers remain strong, the wealth effect may come back into play and drive Manhattan sales once again, especially in the luxury sector.

No. 3: The 2024 Presidential Election

Historical data reveals a noticeable trend in the Manhattan real estate market around election periods. There's a tendency for both supply and demand to dip. While this may be due to uncertainties associated with elections, it is likely more of a seasonal effect as the Manhattan market usually begins slowing down for the holidays around the same time. Either way, buyers and sellers tend to adopt a cautious approach to the market, leading to reduced activity. Post-election clarity sets in around the same time as the busy spring season begins. Manhattan usually sees a burst of activity in March/April, which is more likely due to seasonal patterns versus waning uncertainties.

What we’re watching: If the 2024 election becomes another diametric choice on policy, buyers may pause to wait it out, forcing must-sellers to cut prices to drive demand.

No. 4: Geopolitical Uncertainties

Global events, especially in regions like the Middle East and Ukraine, can cast ripples across global markets, including real estate. While the direct correlations can be intricate, such geopolitical tensions sometimes lead investors to seek safety.
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What we’re watching: If events begin to cast a more global shadow, we could see increased demand for safer, US-dollar-denominated assets, which could translate into a bid for Manhattan condos from foreign investors.

No. 5: Return-to-Office Dynamics

The evolving landscape of work, especially the hybrid model, has brought about significant changes in Manhattan. According to a white paper by foot traffic analytics firm Placer.ai, the percentage of Manhattan workers back in the office recovered to more than 80% of its January 2020 level in June. Although this number has seemingly stalled at these levels, it does suggest that the previous work-from-home mentality in 2021 and early 2022 did not significantly deter transactions and that further gains could help revive the economic health of local businesses, building a foundation for buyer demand.

What we’re watching: If Manhattan workers continue their return to the office, Manhattan’s real estate could see increased demand from current commuters or those looking to remain in vibrant, urban neighborhoods.

Looking Ahead at 2024​

As the last few weeks of the fall season fade away, the Manhattan real estate market stands at a crossroads, with various macro and micro factors vying for influence. From interest rates and economic indicators to global events and local work patterns, the market's trajectory is shaped by many elements. While challenges persist, we are watching the resilience and dynamism of Manhattan real estate, which remains one of its defining features.
 

David Goldsmith

All Powerful Moderator
Staff member
What we’re watching: If events begin to cast a more global shadow, we could see increased demand for safer, US-dollar-denominated assets, which could translate into a bid for Manhattan condos from foreign investors.


NYC foreign investment hits highest level in four years​

32% of city buyers are from abroad

Foreign investors that sat on the sidelines through the pandemic dove back into the city’s sales market in 2023, notching the highest share of the total buyer pool since 2019.
International buyers accounted for 32.4 percent of the city’s investors this year, a leap above figures for 2021 and 2022 and a hair better than the 32.3 percent recorded in 2020, according to a report by brokerage Avison Young.

As of mid-December, 2023 dollar volume had tripled year-over-year, helping New York City regain its place as the top city for foreign investment, the report detailed.
As the rate hikes of 2022 collided with tighter financing markets by early 2023, the city’s domestic investors pulled back, making room for overseas buyers with deep-enough pockets to forgo loans.

“Once financing got more expensive and started to dry up, I think that’s when the foreign investors, being cash buyers, were able to compete,” James Nelson, Avison Young’s head of tri-state investment sales, said.
Qatar and Japan clocked in as the No. 1 and No. 2 buyers of city real estate, respectively, by dollar volume in 2023. Deals done by Qatar-based firms topped $1 billion, while Japan investors accounted for just shy of $1 billion.
Depreciation benefits and better returns drew Japanese buyers, Avison Young broker Brandon Polakoff said. The yield on the 10-year Japanese government bond failed to crack 1 percent through 2023; the average rate for the U.S. 10-year treasury rate was about 4 percent.
Overwhelmingly, foreign buyers flocked to stabilized assets.

“They’re not buying in the challenging part of the market: heavily rent-stabilized or unrenovated buildings,” Polakoff said. “They have very strict criteria.”

The broker pointed to recent transactions as evidence of that demand. In the fourth quarter, Japanese investors closed on three fully occupied, gut-renovated properties for about $35 million.
According to property records, Peak Capital Advisors and JAM Real Estate Partners sold 96 Sterling Place in Park Slope to Japanese investment firm Sow Kousan for about $17 million and 422 East 81st Street on the Upper East Side to Shink for roughly $11 million.
The team also unloaded 355 East 50th Street for $8 million to Kenbishi Sake Brewing, Japan’s first branded sake brewery.
If the Federal Reserve delivers its three forecast rate cuts next year, it’s possible foreign investors will take a back seat to domestic buyers, as cheaper financing would stoke local demand.
“I don’t think foreign buyers are going to be counted out,” Nelson said. “But they definitely will have more competition from U.S.-based investors next year.”

 

David Goldsmith

All Powerful Moderator
Staff member

2024 NYC real estate forecast: Buyers and sellers emerge, renters gain leverage​

Deals in New York City’s sales market plunged in 2023, a result of uncomfortably high mortgage rates that turned off buyers and sellers alike. Even buyers who didn’t need financing were left high and dry because of very low inventory. The problem, in a nutshell: Sellers were sitting on mortgage rates as low as 3 percent and were reluctant to buy if it meant paying 7 or even 8 percent.

Mortgage rates have edged down in the last few weeks—in December the 30-year fixed mortgage rate fell below 7 percent for the first time since August just as the Federal Reserve signaled that it expects to make three interest rate cuts this year, which will lower the cost of borrowing further.

Those cuts are expected to bring buyers back into the sales market this year and get the gears moving again in both the sales and rental markets.

The Fed’s plan “will take some of the pressure off the rental market by encouraging renters to buy,” says Jonathan Miller, president and CEO of appraisal firm Miller Samuel. As a result, he says, “NYC rents will come down, but not dramatically.

“If 2023 was the year of disappointment, 2024 will be the year of incremental change. It’s not a snappy catchphrase,” Miller acknowledges. But most will probably take it.

Ready to get started? Our 2024 forecast is designed so you can skip ahead to the section most relevant to you via the links below. However, because each segment of the NYC real estate market is interconnected, we recommend reading through the entire article when you have the time.


Whether you plan on buying, selling, or renting a new place, here’s what you need to know to achieve your real estate goals this year.

What to expect if you’re a renter: A little more leverage with landlords​

If you’re hunting for a new apartment in the early part of the year, you’re likely to catch a break. You’ll find you have more options to consider thanks to an increase in listings. That’s a big deal for NYC renters, not just because you have a better shot at getting the location, layout, and amenities you want (or at least some of what you want), but because additional listings put pressure on rents.

As inventory rises in 2024, you can expect rents for new leases to stop climbing, says Kenny Lee, economist for StreetEasy. But don’t expect a sharp drop, because inventory levels are still below pre-pandemic levels.

A rent drop in Manhattan​

Renters will find some relief in an unexpected place: Manhattan. Asking rents will likely fall as landlords face the most competition to attract tenants. Why are there more listings here than other parts of the city? One explanation: In the past year, soaring rents encouraged more owners to become landlords, resulting in a 15.9 percent year-over-year increase in the borough’s inventory in 2023, according to StreetEasy.

But at the same time, landlords have been aggressive about encouraging tenants to renew their leases, and with the seasonal winter slowdown upon us, inventory has piled up.

Some new listings are a result of Local Law 18, the Short-Term Rental Registration Law aimed at eliminating illegal rentals. The rules require owners to register their place with the city; in return they are given a registration number that must be displayed on listings. Owners and listing sites that are not in compliance can face steep fines.

“Many of these units were bought by non-institutional investors who are now faced with the option of either converting to a standard lease with a lower return or selling. As the sales market is not exactly on fire right now, seeking new, longer-term tenants seems like the easy choice.” says John Walkup, co-founder of UrbanDigs, a real estate data analytics company.

It’s not clear how much NYC's rental inventory will grow due to these changes or whether this trend will continue, he adds.

The ascent for NYC rents started sputtering in the fall and then showed a surprising decline for Manhattan in November.

According to the Elliman Report, Manhattan’s median rent in November slipped month over month, dropping 4.6 percent to $4,000, Miller, who is the author of the report, previously told Brick. November’s median rent is 9.1 percent lower than the August peak of $4,400

“Manhattan’s median rent is falling faster than anticipated,” Miller says.

But the downward slide doesn’t match the pace of rocket ship-like rent increases last year, a result in part of the Federal Reserve’s rate hikes, which tipped many would-be NYC buyers into the already tight rental market.

Prepare to negotiate​

As Allia Mohamed, CEO of rental platform openigloo, explains it, seasonality is returning to the NYC rental market, and that means the return of the typical winter slowdown and a willingness on behalf of landlords to make deals.

“We’re also seeing more concessions from landlords, such as one month free, especially at new developments, and no-fee apartments, where the landlord pays the fee,” she says. New listings are being advertised with concessions and even if they don’t, Mohamed says renters should be aware you have some ability to negotiate—which hasn’t been the case for apartment seekers in the past two years.

Pay attention to how long an apartment has been on the market—if it has sat for more than 30 days you have a better shot at asking for a free month, amenity fee waiver, or even a rent decrease. But renters should “use their judgment,” she warns. If your goal is to stay long term, you need to prepare for a rent increase when it is time to renew your lease.

That’s a big deal because any rent discount goes away at lease renewal time, and the increase is based on top of the gross (not net) rent. One way you can look ahead is with openigloo’s Listings from the Future. For example, if you know you need to move in four or six months the site can show you listings expected to hit the market then.

Where and when to catch a deal​

Renters likely have until the end of March to catch a deal, says Adjina Dekidjiev, a broker at Coldwell Banker Warburg.

Rents “typically decrease during the winter months, especially for apartments in less desirable neighborhoods. The pattern will likely continue until the start of the busy season in April. Apartments farther from transportation and without outstanding features/amenities will take longer to rent unless they're priced well,” she says.

She says concessions are typically a feature of the slow season, but they depend on several factors, including the location, amenities, and apartment size.

“There are more one bedrooms and studios available than two bedrooms and three bedrooms currently, so owners will likely continue to offer concessions for these,” Dekidjiev says.

Temper your expectations​

Becki Danchik, a broker at Coldwell Banker Warburg, says owners of luxury rentals will need to lower rents because they are having trouble filling vacant apartments.

While renters will have more listings to choose from, they’re not all great places.

“Renters seem to be more selective because there is more inventory to choose from. I have heard concerns and complaints from renters that while there are properties to see, those properties do not live up to their expectations. So I think both sides need to adjust their expectations,” she says.

Should you stay or should you go?​

Brian Hourigan, managing director at BOND New York, expects to see an uptick of leasebreaks in the new year. Tenants will have to make a calculation to see it is worth the cost of moving and any leasebreak penalty to save money over the longer term, he says.

Some renters may get better deals if they opt to sign a new lease somewhere else. In the next quarter, landlords will likely push market-rate tenants to sign longer leases of 16-18 months, he says.

“Tenants will benefit from longer-term leases with the predictability and stability of pricing which comes with that, even though they might be asked to pay a bit more when their lease comes up for renewal,” he says.

What to expect if you’re a buyer: More listings surface as mortgage rates slip​

If you’ve been waiting to buy in NYC, 2024 appears to be the year to make your move—certainly better than 2023 (despite what we said last year. Oops!)

There’s one very important change that nobody saw coming: Starting this year, buyers may (emphasis on may) find themselves on the hook for broker’s fees.

That’s because if you work with a buyer’s broker who is a member of the Real Estate Board of New York, broker fees are no longer something you can assume are the seller’s responsibility. REBNY announced in October it was changing its universal co-brokerage agreement to “decouple” commissions; the change went into effect January 1st. It's an effort to get out in front of the many anti-trust suits cropping up across the U.S. and here in NYC.

What does it mean if you’re buying in 2024? Well here's how it is supposed to play out: A seller will negotiate a fee with their broker and make a separate offer to your broker in writing. Your broker can then accept, reject, or negotiate the offer. If the seller doesn’t offer a fee to your broker, or doesn’t offer enough, under REBNY’s new rules your broker may negotiate their fee with you, which means budgeting an extra 1 to 3 percent of the purchase price.

Don’t be surprised if your broker wants you to sign something to clarify the terms of working together.

As Phil Horigan, founder of The Leasebreak Team, explains, “Generally in NYC only listing agents have needed to worry about getting their client to sign anything before agreeing to work together. I think buyer agents are going to have to start being trained on getting their buyers to sign and negotiate buyer agreements,” he says.

Be prepared for a broker to make a case for why their services are worth paying for, says Douglas Wagner, manager of brokerage services, BOND New York.

“It will be a priority for agents to be able to define their value on both sides of a transaction, and buyer agents especially will demonstrate the tremendous amount of preparation and labor that goes into conducting a single deal or an ongoing professional practice,” Wagner says.

Interest rate cuts lower borrowing costs​

If you were hoping to buy in NYC last year, you were likely stymied by a lack of inventory. Listings dropped 15 percent in 2023 compared to 2022, according to Kenny Lee, economist at StreetEasy.

What gummed things up: Sellers who were sitting on mortgages with rates in the 3 percent range were reluctant to sell and buy somewhere else if that meant they would have to get a mortgage at nearly 8 percent.

But that scenario has already shifted. In December, mortgage rates were approaching 7 percent when the Federal Reserve officials wrapped up their last meeting for 2023, leaving interest rates untouched. They forecast that they will cut borrowing costs three times in 2024.

The Fed raised rates 11 times during 2022 and 2023 to tamp down inflation but has held rates at 5.25-5.50 percent since July.

“There are signs that the cumulative rate hikes are doing their job and working to bring the rate of inflation down to its goal rate,” says Melissa Cohn, the regional vice president of William Raveis Mortgage. “High interest rates are impacting the economy and hopefully will bring inflation back to 2 percent [this] year,” she says.

Cohn says she thinks now is a good time for potential buyers to “start making a move,” given that mortgage rates have fallen in recent weeks, and that low demand during the holiday season may soften sellers’ resolve a bit. Because the Fed didn’t reveal the timing of this year’s interest rate cuts, buyers may want to act now rather than wait for a friendlier economic environment that may not materialize.

“We’re probably at an inflection point where rates have come down enough that more buyers are coming back into the marketplace, and prices have certainly not gone up,” Cohn says.

Prices will eventually increase​

After falling for four consecutive quarters, median prices for Manhattan co-op and condos appeared to stabilize in the third quarter, according to the Elliman Report. (Fourth quarter sales data was unavailable at publication time.)

But eventually there could be a swing in the other direction this year as more buyers and sellers pile into the market.

As mortgage rates fall, more sellers will be inspired to sell their properties, says Brian K. Lewis, a broker at Compass. That means buyers should have more options, he says, predicting that prices will eventually rise—“but not dramatically”—with more listings.

“Many would-be sellers are stuck in their current homes, married to their incredibly low interest rates. As mortgage interest rates come down, more sellers will enter the marketplace, finally ready to move on with their lives, and get to their next home. This means more choices for buyers in a market already starved for inventory,” Lewis says.
 

David Goldsmith

All Powerful Moderator
Staff member

Falling mortgage rates spur Manhattan, Brooklyn markets​

Brooklyn still more challenged, but 2024 promising for both boroughs

Real estate agents will be hoping for more results like December’s in 2024.
Manhattan and Brooklyn saw a positive trend in new signed contracts last month, according to data collected by Miller Samuel for Douglas Elliman. Agents have reason to be optimistic about 2024, according to report author Jonathan Miller.

“I dubbed this year the year of incremental change,” said Miller, who had dubbed 2023 the “year of disappointment.”
“What I think we’re going to see in 2024 is more sales, more inventory and perhaps higher prices.”

Miller said most of the uptick in newly signed contracts last month coincided with a steep drop in mortgage rates that began near the middle of December, when the Federal Reserve announced it was done raising interest rates and would likely lower them this year.
Manhattan enjoyed 5.6 percent year-over-year growth in new signed contracts across condos, co-ops and one- to three-family buildings, while Brooklyn’s annual rate improved from a negative in November to no change in December.
A surge in new signed contracts likely means a surge in closings early next year, said Miller.
In addition to more contracts, Manhattan’s market gained for-sale inventory last month, up 9.5 percent from the same period last year across all three property types.

“Manhattan isn’t devoid of inventory like the suburbs are,” said Miller. “But the pricing by sellers is still on the high side, so to the brokerage community it doesn’t feel like you have enough supply.”

Brooklyn’s market is tighter. New listings fell nearly 17 percent in Kings County last month.
“Brooklyn has had, since before the pandemic, a much more acute inventory shortage than Manhattan ever did,” said Miller. “Inventory can’t be created as fast as demand wants.”
Miller believes pricing will stay strong this year, despite increased listings, because lower mortgage rates will bring buyers into the market.
Lower rates will incentivize owners to list homes because there will be less of a spread between their current mortgage rate and their next one. Better rates will also bring more buyers into the market to meet the inventory, meaning prices won’t fall too far.
“If we look at this whole pandemic as a saga, 2023 will be the bottom and 2024 is a step beyond the bottom,” said Miller.

 

David Goldsmith

All Powerful Moderator
Staff member

Homebuyers gain negotiating power: StreetEasy​

Sellers soften as buyers wait for lower mortgage rates, more inventory

Buyers in New York City’s residential market are gaining leverage — for now.

The typical citywide discount for a home sale in December was 4.2 percent off the list price, according to a report from StreetEasy. That’s up from 3.8 percent at the end of 2022.
It’s a trend agents say they’re seeing anecdotally, and that will likely lead to lower asking prices as sellers adapt and price their homes more competitively.

But they say the spring selling season could undo that trend.
“I think people are going to be in for a very rude awakening once we get to the spring market,” said Compass agent Raquel Lomonico, explaining that a potential interest rate cut and seasonality will bring a big enough surge of buyers to erase the usual uptick in listings, and then some.
The rise in negotiability comes from buyers sitting on the sidelines as they wait for mortgage rates to drop further and for an increase in for-sale inventory.
The average rate for a 30-year fixed mortgage was 6.66 percent last week, according to Freddie Mac, and has been on a downward trend since peaking at 7.76 percent in late November. But it’s still more than twice what it was early in the pandemic, and the Federal Reserve has created expectations that borrowing will become less expensive this year and next.
The dearth of buyers has caused listings to sit on the market, which makes sellers more receptive to negotiation.

Some of the biggest discounts are in the luxury market, which StreetEasy defines as homes asking $4.95 million or more. Although asking prices are up year-over-year, a typical luxury home sale was discounted 7.6 percent from the asking price in the fourth quarter, up from 4.6 percent a year earlier.

“While it’s typical for highly priced homes to sell with larger discounts, the sector’s current median sale-to-list ratio is much lower compared to the same period in 2022 — indicating the upper hand is shifting more clearly from sellers to buyers,” the report stated.
Agents say there’s also strong negotiability in the new-development market.
“A lot of developers are saying if you come in at full ask, we’ll give you a 2 percent [mortgage rate] buy-down for two years and [pay for] transfer taxes, sponsors’ attorney fees… [and] I am seeing some negotiations on common charges, where they’ll pay the common charges for a year,” said Lomonico.

But demand is strong for well-priced apartments, said The Agency broker Mike Biryla, suggesting the market could shift quickly in the spring.
Rate cuts by the Federal Reserve in March, which Goldman Sachs predicts, could also catalyze buyers, according to Lomonico. Previously, prognosticators thought the first rate cut wouldn’t come until mid-year.
“There’s no inventory of two-beds, one-bathroom apartments on the Upper East Side with washer/dryer in-unit,” Biryla said. “Those typically trade for a million. I priced [one] at $995,000 … We literally had seven offers the first week and we sold for 3 percent over ask, all cash.”
But he’s had to de-list other units until the spring, the busiest season of the year, so they don’t seem stale when the market picks up.
“If you’re still actively looking to buy something — it’s hard not to sound like a salesman — but this is the absolute best time to pull the trigger,” he said. “There will be new inventory [in the spring], but it’s not going to be this tremendous dump of inventory people are expecting.”

 

David Goldsmith

All Powerful Moderator
Staff member


Why springtime may be a seller’s market in Manhattan​

UrbanDigs predicts an end to the buyer’s market. The only question is when.

Buyers beware: The spring is shaping up to be a sellers’ market.
Pent-up demand and a likely interest rate cut appear poised to bump activity in the spring market above last year’s levels, according to UrbanDigs founder John Walkup.

“It seems to me it’s going to be busier than you would expect, given the history of the last couple years of this market,” said Walkup. “A lot of brokers, had you asked them in November or December ‘What’s the spring going to look like?’, they’d be really depressed. If you ask them now, they’ll say we’re going to be a lot busier than we anticipated.”
The question facing sellers and agents is when the seller’s market will actually arrive. After a rapid pace of sales in 2021 led to a historic sellers’ market, the balance has since shifted slightly in favor of buyers who stayed in the market.

The average price per square foot for condos fell 8 percent between November 2022 and September 2023, based on an analysis of rolling three-month sale prices collected by UrbanDigs. The drop in prices suggests a lack of buyers in the market bidding up prices.
The pace at which the pendulum turns back to sellers will determine the best time to list homes. Prices have already started to tick back up, according to the most recent rolling three-month figures.
“The whole point is you want the bulk of your listing window, primarily the end bit, still in the window of when most buyers are showing up,” said Walkup. “You’re going to get the most traction and the most visibility because you have more buyers looking at listings.”
[IMG alt="UrbanDigs Predicts Strong Spring Market
"]https://static.therealdeal.com/wp-c...PSF-by-CS-Date-UrbanDigs.png[/IMG](UrbanDigs)

The days of falling prices could soon be over because inventory hasn’t ticked up as it usually does in a buyers’ market, according to UrbanDigs’ data.

“What’s going to happen with prices…when seasonal buyers come in and they’re hitting a pool of limited inventory?” said Walkup. “You can see some interesting movement.”
While most contracts are signed in March, the market’s peak will depend on how much of a factor interest rates have played in dissuading buyers from pulling the trigger on a new home. A rate cut in March, which Walkup said seems increasingly unlikely given the economy’s resiliency, could jumpstart activity. If rates trend sideways, activity might not spike until later in the cycle, closer to a more certain cut in June.
“We could see a really, really busy summer,” he said. “There’s only so long you can put off a move if you’ve got a new family or have a change-of-life event.”

Walkup believes there’s pent-up demand in the Manhattan market due to last year’s slow market, something agents have corroborated anecdotally.

“There will be new inventory [in the spring], but it’s not going to be this tremendous dump of inventory people are expecting,” Mike Biryla, a broker at The Agency, said.

 
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