‘Year Of Disappointment’ In Store For NYC’s Condo Market

New York City’s condo market is facing a lull as fewer new units hit the market and sellers of existing units, disappointed with the offers they are receiving, are pulling their listings from the market in large numbers.

Although infamously oversupplied before the pandemic, experts say the past three years have transformed NYC’s luxury condo market from glut to shortage. But the confluence of lower-than-typical available supply and high interest rates mean neither buyers nor sellers can feel it is their market.

“I dubbed 2023 as the year of disappointment,” said Jonathan Miller, president and CEO of appraisal firm Miller Samuel. “Buyers aren't going to get much of a discount — they may get some, but nothing significant — and sellers aren't going to get what they could have sold for in 2021, so, equally disappointed.”

In the months prior to the pandemic, luxury brokers had concerns over how to move the thousands of condo units on the market — an estimated 74 months of inventory. Developers were feeling the pressure with 6,000 more units in the development pipeline at the end of 2019, per Halstead Development Marketing data.

Then came the pandemic, with its near-zero interest rates, explosion in personal savings and more buyers looking for new living space in as they worked from home.

“New development significantly benefited from essentially clearing the deck,” Miller said. “The excess supply was wiped clean.”

In the fourth quarter of 2019, Manhattan had 6,643 condos listed for sale, spending an average of 99 days on the market, according to Douglas Elliman. Fast forward to Q4 2022, and there were just 769 listings in total.

“This is the first low-inventory, low-demand cycle I've seen in any kind of recent memory,” BOND New York Director of Brokerage Services Douglas Wagner said.

Just 15 luxury contracts were signed in the first week of January this year, and 50 more were signed over the next three weeks, according to data from Olshan Realty. In the first four weeks of 2022 — as the omicron variant was coursing through the city — 102 luxury contracts were signed.

The market is picking up this month, said Nicole Gary, CEO of the Nicole Gary Team at real estate agency Keller Williams, but the lull in inventory has been slowing down deals for months.

“Last summer, I had a client in town who was looking for a really special trophy. Like, a duplex penthouse or triplex penthouse, he had a $30M-plus budget, and I really had almost nothing to show him,” she told Bisnow. “It's a supply-and-demand issue. And I think we're gonna see that in the coming years, because we don't have a lot of new development.”

The other factor, Gary said, is sellers who are holding onto existing units for longer as they seek out higher prices and buyers aren’t budging either, hoping for a return to pandemic-era discounts.

Sellers delisted as many as 5,300 units in the second half of 2022, Vickey Barron, a real estate agent at Compass, told Bisnow.

“People have pulled their listings off the market,” she said. “It's because they're feeling defeated there. It's not selling.”

Some buyers are also hesitant to take the plunge, watching the stock market for signs of stability before they commit to an investment, Gary said. And while luxury condo buyers don’t necessarily need mortgages, some are also watching the Fed’s interest rate hikes for indications of economic stability following the rate hikes seen last year, BOND’s Wagner said.

Condos took an average of 86 days on the market to find a buyer in Q4 2022, Douglas Elliman data showed — still well below the 146 days it took for the average condo to sell in Q4 2019.

Those who did sell their units either did so because they had to, taking a financial hit in the process, or because they could afford to make a loss and were hoping to reinvest their capital in lower-tax markets, Barron said.

Units are taking almost an entire quarter to sell because, in addition to hesitating on price, buyers are also being extra selective about asset quality before making a purchase, Wagner said.

Despite the minimal supply on the market, Douglas Elliman data showed that pricing hasn’t budged too much yet. The average sales price for luxury condos last quarter was $11M — a 5.3% increase from the year prior, but below the $11.3M average from Q4 2019.

“There is a hangover inventory, and some of it has been on the market now long enough that prices are vulnerable,” Wagner said. “It doesn't mean that every seller is going to accept a lowball offer.”

There has been more price fluctuation in the nonluxury condo market, which brokers say is indicative of what type of sellers are vulnerable to the current market conditions. Q4 2019’s average price was $1.6M but inched up to $1.86M in the final quarter of 2021 and back down again to $1.81M last quarter.

“In the last couple of years, I'm at the closing, they're losing money, and then they're handing me a check and it doesn't feel good,” Barron said. “It's a really odd moment where you're seeing people choosing to sell where they have a loss. It's not fun, I have to tell you. It makes me feel bad.”

Existing owners may take longer to come to terms with new pricing, Brown Harris Stevens Development Marketing President Stephen Kliegerman said, but pricing for new developments will likely shift as scarcity sets in for buyers.

“It's a delicate dance between developer and buyer. I think maybe the next month or two is a good opportunity for buyers, as there's still a reasonable amount to supply,” Kliegerman said. “But I think as supply dwindles, we're gonna see developers be less negotiable and feel a bit more comfortable with holding the prices.”