The market softens, but experts predict a controlled decline rather than a sharp correction.
A Modest Decline Amid Market Shifts
Manhattan’s housing market saw a 5.5% year-over-year decline in median home prices during the fourth quarter of 2022, the first such drop since the onset of the pandemic in mid-2020. Co-ops and condos sold for a median price of $1.1 million, according to data from appraiser Miller Samuel and brokerage Douglas Elliman Real Estate.
Despite the dip, experts suggest the market is far from a freefall. Jonathan Miller, president of Miller Samuel, anticipates a gradual decline in pricing throughout 2023, driven by limited inventory and seller resistance to discounted offers.
Tight Inventory Supports Values
Manhattan’s inventory remains constrained, with 6,523 homes on the market at the close of 2022. Although this represents a 5.1% increase from the previous year, it’s a 16% decrease compared to the third quarter and remains historically low for the area. Tight supply continues to uphold property values despite rising interest rates.
Impact of Rising Mortgage Rates
The Federal Reserve’s rate hikes in 2022 pushed the average 30-year fixed mortgage rate to a peak of 7.08% during the fourth quarter. In response, more than 55% of Manhattan buyers paid in cash—the highest proportion since Miller Samuel and Douglas Elliman began tracking payment methods in 2014.
High borrowing costs have slowed transactions, with closed sales down 30% year-over-year to 2,546 in the fourth quarter.
Contextualising the Decline
While the decline in prices and sales may suggest market struggles, the broader picture reveals resilience. Fourth-quarter median prices are still 10% higher than pre-pandemic levels in 2019, and transaction volumes have grown nearly 6% compared to three years ago.
“The overall narrative is more negative than it actually is,” Miller concluded, highlighting the market’s relative strength despite ongoing challenges.
