The data suggests that the (housing) market is not crashing, but is simply returning to normal, … [+] seasonal volume. In other words, the slowdown appears to be more of a comparison issue than a macroeconomic shift. It’s not a crash, it’s a return to center.
The sales market in Manhattan has slowed down. Compared to last year, contracts signed in May, June and July have decreased by an average of 25%.
The main reasons for this: rising mortgage rates, rising inflation and fears of recession. Regardless of the cause, the drop in volume has forced sellers to compete on price. As a result, there were 25% more price cuts over the same period and another 7% fewer than the year before. With volume-leading prices, today’s price action will likely become evident in the upcoming quarterly reports. At this point, it’s only a matter of time before the slowdown becomes part of the enduring sales record.
While this seems dramatic, the data suggests that the market is not crashing, but is simply returning to normal, seasonal volume. In other words, the slowdown appears to be more of a comparison issue than a macroeconomic shift. It’s not a crash, it’s a return to center.
Zooming In: The Slowdown is Real
Judging by the numbers, 2022 got off to a strong start. In the first quarter of 2022, 3,675 contracts were signed, the highest quarterly number in 15 years and almost 4% more than in the first quarter of 2021. See the article : Indian car buyers are selling SUVs, technology like never before. The increasing volume trend appeared to continue in the second quarter, but by mid-April, demand levels began to fall, with April , May, June and now July had larger deficits compared to their prior year periods.
Manhattan contracts signed by Week
Signed Manhattan contracts 2022 vs. 2021
Throughout 2021 and early 2022, buyers had to contend with increased competition as high-quality inventory became scarcer, resulting in an average original offer discount of just 1.9% for deals signed in April 2022. In other words, half of the sellers who signed a deal walked away with 98.1% of their original asking price.
However, as the market slowed, units began to linger longer, forcing more and more sellers to compete with each other by cutting prices. For example, in January there were around 600 price cuts, which is roughly 15% of actively listed inventory. By June, that number had more than doubled to more than 1,500, which is nearly a quarter of actively listed inventory. As such, the slowdown is broad, real, and impactful.
Days on Market (DOM) for signed contracts by week
Manhattan Number (#) of Price Cuts and Mean Cut Percentage (%)
Zooming Out: The Summer is Usually Slow
Stepping back from Manhattan’s day-to-day sales details and looking at historical patterns reveals that the summer market is almost always the slowest in the third quarter. On the same subject : The real estate sector fell 21% in the first half of the 22nd, focusing on mortgage rates. So far, the pace of deals signed in the third quarter suggests the trend is close to the 2007-2019 average.
Contracts signed: Average 2007-2019, 2021 & 2022
The exception that proved the rule was 2021, when deal volume for the summer exceeded the 2007-2019 average every quarter. Of course, this blowout performance set the stage for hand-wringing declines, simply because the comparison was aimed at above-average highs and not normal levels.
Putting June 2022 in the context of other months, transaction volume levels appear reasonably normal. With mostly seasonal high season months at the top and typically quiet summer months at the bottom. In fact, a comparison of historical June performance shows that June 2022 falls in the middle. While the annual and percentage change numbers paint a picture of a market in freefall, the wide-angle view suggests the market has simply returned to normal. Buyers are still looking, and there are still offers.
Historical transaction volume in June compared to June 2022
What This Means for Sellers
The inventory advantage sellers have enjoyed for the last two years is mostly gone. To see also : High-Tech Mattress Company Bryte Raises $20M In Temp Round Led By Sealy. Sure, exceptional units will continue to garner attention and premiums, but just listing a property is no longer enough.
This means that sellers today need to adjust their expectations and focus on market pricing. As transaction levels have essentially returned to normal, price success can be gauged first by buyer traffic and then by days in the market. A price at or near the market should result in seasonally appropriate buyer traffic within the first two weeks of listing leading to a signed deal ahead of typical market days in the region.
Sellers tend to focus on current selling prices, while buyers are more interested in current asking prices. When the market heats up with high activity and low inventories, as it has been throughout 2021 and early 2022, interests align. However, when the market slows down, buyers have more choice and less urgency, so current offers are compared to each other and to the expectation of future offers, providing even more choice.
Sellers who ignore this dynamic and choose to list at a price based on recently completed sales that more closely reflect the market six months ago will find it frustrating. There is little to no traffic and longer than average days in the market. Sellers today need to close the gap between trailing sale prices and real-time list prices if they want to close a deal.
What This Means for Buyers
As the media covers the headline-grabbing year-over-year drops, there’s a whole lot of what crypto folks call FUD: fear, uncertainty, and doubt.
For intrepid shoppers, the current slowdown means a pause from supply constraints and intense competition. As more and more sellers lower prices, a window of opportunity has opened up for negotiations. But just as the market seemed unstoppable over the winter, the slowdown could prove temporary. Sellers tend to respond to volatile markets by withdrawing their offerings, so the greater choice buyers have today may not last.
For buyers, the return to seasonality coinciding with the end of the post-pandemic run may offer both choice and bargaining, particularly for those buyers who are less interest-rate sensitive.
