The number of sales closed in Manhattan, New York City’s most-populated borough, rose 2.4% year over year in March to 2,457 units, making for the first annual increase in four quarters, according to a report from real estate broker Douglas Elliman.
“The market is back,” said Steven James, president and CEO at Douglas Elliman Real Estate in New York City. “You talk to any real estate agent today, they are busier than they've ever been.”
Discounted prices, low mortgage rates and wider access to vaccines have all been factors in luring first-time homebuyers into the market.
The group accounted for 42% of purchases, the largest in the seven years of record-keeping. They typically make up no more than a low 30s percentage of the Manhattan market.
“Part of it is saving money [during the pandemic],” said Jonathan Miller, CEO of New York-based real estate appraisal and consulting firm Miller Samuel.
“Part of it is the newfound affordability with more discounts in pricing. Part of it being cooped up and anxious for change,” he added. “It all flowed together to drive more buyers into the market.”
The median price for all co-ops and condos in Manhattan in March was down 4%-5% from a year ago to $1.075 million. The median price bottomed in October at $983,500, although it was technically lower in June when the market wasn’t functioning because of COVID-19 lockdowns.
The Manhattan real estate market was already soft going into the pandemic, facing headwinds from the 2018 federal SALT tax, the mansion tax and a rent law that punished investors who were landlords. The pandemic helped sellers more easily adapt to lower prices.
Also enticing buyers were historically low mortgage rates, although up sharply from the beginning of the year. A 30-year fixed mortgage rate was around 3.27%, according to Bankrate.com, after dipping below 2.9% earlier this year.
Discounted pricing and low rates combined to help pull first-time buyers into the market at the expense of the rental market. Younger buyers typically skew toward 1- and 2-bedroom starter apartments, which caused those prices to hold up better than larger units.
Studios, meanwhile, are seeing steeper price declines than 1-bedroom units, something unique to this cycle, because unemployment during the pandemic was skewed toward lower wage earners and universities have been teaching remotely.
Those worried about a drop in prices bringing on more supply need not, according to Miller.
Inventory is “somewhat elevated, but we are not flooded with supply,” Miller said. “It is approaching the long-term norm.”
James noted that buyers looking for deals can find value on the Upper East Side, West Side and in Midtown, but said that they won’t last long – especially if schools are teaching in-person this fall.
With restaurants hopefully returning to full capacity and Broadway set to open its doors for the first time since March 2020, James said it’s only a matter of time before New York City returns to normal.
“I expect a boom market in the fall,” he said.