A man enters a building with rental apartments available on August 19, 2020 in New York City.
Eduardo MunozAlvarez | VIEW press | Corbis News | Getty Images
Sales contracts in Manhattan for residential real estate soared by 73% in February, and brokers say the days of big price cuts and deals in the city may be ending.
There were more than 1,110 sales contracts signed in February, up from 642 in 2019 and marking the third straight month of year-over-year gains, according to a report from Douglas Elliman and Miller Samuel.
After seeing historic declines in deal volume in 2020, as hundreds of thousands of people migrated from the city to the suburbs and other states, Manhattan’s real estate market is bouncing back more quickly than many brokers and analysts expected, thanks largely to the Covid vaccine progress and price cuts.
The first two months of 2021 saw a total of 2,472 contracts signed — the highest levels since the Manhattan market peak in 2015, according to Garrett Derderian, director of market intelligence for Serhant, a real estate brokerage firm. Sales contracts in 2021 so far have topped $5 billion.
“This is a remarkable recovery from 2020, and a trend we began to see emerge from the time Biden was elected in November to the announcement of the first viable vaccines for Covid,” Derderian said.
Brokers and analysts say much of the activity was driven by lower sales prices, which have fallen an average about 10% in Manhattan, according to Jonathan Miller, CEO of Miller Samuel. Many condo buildings were forced to cut prices by 20% or more and resales of some luxury apartments on “Billionaire’s Row” in midtown Manhattan have been selling at less than half of their peak prices in 2015.
But now, with rising demand from buyers returning to the city, price cuts and deals could be ending or fading soon, brokers say. The inventory of unsold apartments, which had ballooned to more than 9,400 at its peak last fall, has shrunk by 20% to about 7,500, which is close to the historical average, according to Miller.
“It looks like it is going to be a short window” for price cuts, said Steven James, president and chief executive officer of Douglas Elliman’s New York City brokerage.
Of course, there is still a large supply of “shadow inventory” — or apartments that are empty but unlisted —and sellers who need to sell quickly will still need to discount, analysts say.
Potential tax increases in New York could also prolong any recovery, along with remote work policies that allow workers to live outside the city. Many say it could still take years for Manhattan prices and deal volume to return to pre-pandemic levels.
Yet analysts and even the most bullish brokers say they are surprised with how quickly Manhattan real estate is bouncing back after last year’s record decline. Brokers say the buyers are a mix of three categories: those who left the city and are returning, younger buyers who were priced out of the market for years and can now buy thanks to price cuts and low mortgage rates, and new buyers who sold their homes in the suburbs for high prices and want to try living in the city.
Much of the growth is being driven by the high end, with contracts signed for listings above $10 million quadrupling. Yet even studio apartments and one-bedrooms are seeing strong gains from younger buyers.
“The bigger narrative is the inbound migration to Manhattan,” Miller said. “I think the youth renaissance we are going to see in Manhattan is a big part of the story.”