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Apartments in Manhattan saw a drop in sales

Alice Blake on February 27, 2023

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Apartment: People were alarmed by the sharp 29% decline in apartment sales in Manhattan over the fourth quarter.

Fears that the market will stall due to buyers’ and sellers’ anxiety owing to the status of the economy and interest rates have been raised by the decline.

The news

2,546 sales were made altogether in the fourth quarter, per analysis by Douglas Elliman and Miller Samuel.

Even though the numbers were good, they were 3,560 less than the year before.

The pandemic’s peak has also been the largest since its apex in the third quarter of 2020.

However, the median price did drop by 5.5%, marking the first price drop since the beginning of 2020.

Market

The real estate market in Manhattan has finally recovered from the devastating effects of the pandemic, but the drop in sales and prices raises some concerns about potential new problems in 2023.

The following factors have had a significant impact on the Manhattan real estate market and are probably going to play a role this year:

Rising interest rates
A weaker economy
A declining stock market

Concerns

Analysts believe a prolonged stalemate between buyers and sellers is the most significant concern.

There won’t be buyers until prices fall since sellers won’t offer while costs decline.

The CEO of Miller Samuel, an appraisal company that offers market research, is Jonathan Miller, who commented on the issue.

“I could see the market moving sideways, with some modest declines in some sectors,” said Miller.

“And it could weaken further if there is the backdrop of recession and job loss.”

Inventory

Despite declining sales and prices, inventory is still low because some sellers are stalling their listings.

After the fourth quarter, there were 6,523 units still available, according to the report.

Although there was a 5% increase, the numbers are still below the historical average of close to 8,000.

Analysts predict prices won’t decrease enough to entice buyers waiting for reductions because inventory hasn’t significantly increased.

In contrast to the third quarter’s 4.1%, according to Serhant, there was a 6.5% difference between the initial list price and the sales price.

According to Jonathan Miller, as borrowing costs increased, more Manhattan buyers chose to make all-cash acquisitions.

The deals represent the highest proportion of sales ever: 55% for the fourth quarter.

Luxury units

Still making up the vast bulk of the market are luxury and high-end apartments.

They comprise the top 10% of the New York real estate market.

Despite a dip in the general Manhattan market, the median sales price for luxury apartments rose by 4% in the fourth quarter.

Additionally, since 2019, the median price for high-end and luxury apartments has climbed by 21%, which is twice as much as the whole market.

2023 outlook

The network of freshly formed and ongoing alliances predicts a sluggish first quarter.

According to Brown Harris Stevens, only 2,312 contracts were signed in the fourth quarter, a decrease of more than 43% from 2022.

Meanwhile, Serhant says that this quarter was the worst for signing new contracts in the last ten years.

“Contracts signed are a timelier indicator of demand and registered one of the slowest finishes to any year since 2008,” said Brown Harris Stevens.

Brokers are nonetheless optimistic, as many believe this year will deliver a pleasant surprise.

They cited the rates’ recent stabilization and shoppers’ ability to get deals in a market that is currently softening.

Deals

Due to the frequency of year-end deals, John Gomes, the Eklund Gomes team co-founder at Douglas Elliman, said December was “on fire.”

“It really caught us off guard,” said Gomes.

“Things really turned around in December.”

John Gomes claims that a shopper paid $20 million for a townhouse in Greenwich Village even though it wasn’t for sale.

Additionally, he said that a real estate investor submitted offers for particular flats in the development, which appeared to be accepted today.

Foreign influence

Gomes attributed the growth in sales in December to the influx of overseas clients, many of whom began returning to New York in December.

Travel restrictions worldwide are gradually easing, and the dollar value is somewhat starting to fall.

Brokers claim buyers returned in December, mostly from China and the Middle East.

Brokers claim that purchasers are paying cash and taking advantage of lower costs to avoid rising interest rates.

To sell any remaining apartments, developers of new apartment buildings are likewise decreasing prices.

“Developers are being realistic, they’re making concessions on price and closing costs,” said John Gomes.

“I feel optimistic about the coming year.”

Reference:

Manhattan apartment sales plunge in fourth quarter as brokers fear a frozen market

The Fed needs freedom to make hard decisions

Alice Blake on January 12, 2023

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The Fed: After prices have risen to levels not seen in decades, the Federal Reserve attempted to control inflation last year.

However, their efforts have run into complications since political meddling has limited the Fed’s authority to make decisions.

Jerome Powell, the chairman of the Fed, recently spoke on the subject.

Remarks

Jerome Powell reiterated on Tuesday that for the central bank to effectively control excessive inflation, it must be free from political pressure.

Even if it leads to politically unfavorable criticism, the Fed Chairman informed Sweden’s Riksbank that stern measures would need to be taken to stabilize prices.

“Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time,” said Powell.

“But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”

“The absence of direct political control over our decision allows us to take these necessary measures without considering short-term political factors.”

At a meeting to discuss the independence of central banks, the Fed Chair remarked.

There was a question-and-answer period following the comments.

Actions

Jerome Powell’s speech included no references to the course that the policy will take this year.

In 2022, the Federal Reserve raised interest rates a record seven times, for a total increase of 4.25 percentage points.

The increases raise the possibility of more hikes this year.

Opposition

The Federal Reserve frequently makes choices that are harshly criticized.

Public officials’ grievances and critiques are nothing new, but Powell’s Fed has drawn fire from both political parties.

Prices increased under his leadership, which former president Donald Trump condemned.

Democrats like Elizabeth Warren, a progressive senator, have criticized the most recent interest rate hikes.

President Joe Biden has refrained from commenting on the Fed’s actions, stating that it is the central bank’s responsibility to deal with inflation directly.

Jerome Powell stated that political factors had not swayed him in spite of the allegations.

Calls for climate change

During his speech on Tuesday, Powell addressed the lawmakers’ calls to use the Fed’s regulatory authority to fight climate change.

Last year, he received letters from four top Republican House Financial Services Committee members.

The Republicans argued that the Federal Reserve shouldn’t control consumer demand or decide which businesses get more support.

Powell said that the Fed should continue on its current trajectory rather than deviate from pursuing perceived societal benefits that are weakly connected to their legal obligations and goals.

He asserts that the Fed’s request for large banks to evaluate their financial preparedness for climate-related calamities (such as hurricanes and floods) is the closest thing to climate-related activities they should be involved in.

“Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public’s will as expressed through elections,” added Powell.

“But without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals.”

“We are not, and we will not be, a ‘climate policymaker.'”

Climate program

A “scenario analysis” is being solicited with the inclusion of the six biggest banks in the US as part of a pilot program the Fed is launching this year.

An institution’s resilience to significant climatic disasters will be assessed through the analysis.

The test will resemble the so-called stress tests used by the Fed to assess how banks might respond to actual economic downturns.

The following banks are taking part in the exercise:

Bank of America
Citigroup
Goldman Sachs
JPMorgan Chase
Morgan Stanley
Wells Fargo

Independence

Throughout his remarks, Jerome Powell discussed central bank independence and maintained that the American people profited from it.

According to Powell, central banks’ independence empowers them to make difficult decisions.

“Restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” he added.

Congress set the highest employment and price stability targets for the Fed and its staff to be independent and use its tools to carry out the goals.

“Taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence,” said Powell.

References:

The Fed is not a ‘climate-policy maker,’ Powell says

Powell says Fed might have to make unpopular decisions to stabilize prices

Tag: Interest rates