A confluence of economic factors—including rising mortgage interest rates, inflation and decreasing stock values—is having a cooling effect on real estate sales across the U.S.
In New York City, where investors are also grappling with record-breaking apartment prices in Manhattan, many would-be buyers are taking a step back, compounding the typical summer slow down.
But for those who intend to buck the trend, take the plunge and buy now in the city, there are opportunities to find deals—perhaps for the first time in many months. And co-ops in particular are a good product to focus on, brokers say, for buyers looking for better negotiability.
“I’ve been saying for a while that the value is in co-ops,” said Lisa Lippman, an agent with Brown Harris Stevens in Manhattan. “They will maintain their value better over the long-term, and buyers will find the best value now in something that’s been sitting on the market. They may not get a price reduction, but the seller will be more negotiable.”
Despite the smaller pool of buyers and diminished competition, buyers should not expect a market that has shifted wholly in their favor. Supply remains low throughout New York City, and many homeowners feel reluctant to list their properties amid increased economic uncertainty.
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“We have very tight inventory because people can’t move so easily now,” said Jessica Cohen, a broker with Douglas Elliman in New York. “When you think about letting go of a home you might have bought in the last 10 years and buying back into a market that’s higher priced, with higher interest rates, it just doesn’t make sense.”
In fact, some home sellers are opting to rent temporarily and wait to buy until the market cools further and prices come down for this very reason, according to The New York Times.
But trying to time the market in this way can be difficult, if not impossible.
“Buyers who have the purchasing power now and are thinking long-term will find some interesting opportunities in the near future,” said Tara King-Brown, a broker with Corcoran in New York.
After an initial drop with the onset of the pandemic in early 2020, sales for both co-ops and condos in New York picked up dramatically, with a busy pace continuing into the early months of 2022. In April, total co-op sales were up by 10.9% and condo sales by 23.1% year over year, according to data from Realtor.com. Buyer demand drove prices up, too.
“We had 12 to 18 months of incredible velocity and price appreciation,” Ms. King-Brown said. “But with interest rates almost doubling and portfolio values decreasing, that impacts buyers. It feels right now like things are stabilizing and we’re seeing more normal pre-pandemic behavior.”
As of June, sales of co-ops and condos in Manhattan were down 30% year over year, according to Douglas Elliman’s market reports. Prices, however, remain high, with Elliman finding the median sales price for the second quarter at a record $1.25 million for all Manhattan apartments.
The diminished demand from buyers may soon force sellers to come down in their pricing.