The year kicked off with strong financial markets, shrinking inventory, foreign buyers back in the picture, and a new mayor for NYC. These things all boded well for Manhattan real estate in January with apartments selling at 98% of their last asking price—the highest figure since 2017—and homeowners enjoying interest rates as low as 3.22 percent.

Also worth noting as it relates to my firm, Brown Harris Stevens acquired Christie’s International Real Estate brokerage, bolstering its already strong brand and dynamic workforce.

By February, we began to see home prices and interest rates slowly creep up, but the luxury market remained immune to this as it continued to do exceptionally well. In this same month, the Russia-Ukraine war began to heat up and shortly thereafter, we saw Russians quietly unloading their luxury properties because of US sanctions.

The first quarter exceeded all expectations with a record-breaking $7.3 billion in sales, the strongest start to any year and 44% higher than 2021. It also happened to be the third consecutive quarter with record-high sales. 

The robust market and lure of NYC was prompting more people to return to the city post-pandemic. This had a significant impact on the rental market, driving rents up as high as 33 percent into the second quarter. Home ownership became more attractive, especially after a NY Times article reported that American homeowners gained more than $6 trillion in housing wealth over the course of two years during the pandemic due to low inventory and burgeoning demand.

Midway into the second quarter, we began to see hints of a market shift as buyer demand dropped between March and April, although demand was still 30% higher than normal at that time. Even though demand wasn’t necessarily impacted, we did see a 30% drop in transactions by May of this year.

By the third quarter, mortgage rates were averaging around 5- to 6-percent, although we did see one of the biggest one-week drops since 2008 in July, which was thought to be due to recession fears. The rental market had also reached an all-time high, with the average rent reported to be $5,000. This had some would-be sellers shifting from selling to renting their homes to take advantage of the rental market at that time.

Toward the end of summer, the market cooled off significantly due to inflation, rising mortgage rates and fear of a recession. The third quarter reported an 18 percent drop in sales, which was attributed to mortgage rates more than doubling since the start of the year. 

By October, Manhattan had shifted to a buyer’s market as demand fell and inventory rose; yet we didn’t see any sign of deeply discounted prices at that time. As of today, the average mortgage rate is sitting at close to 7.5 percent and rates are expected to remain high into 2023. 

The luxury market performed exceedingly well this year with $10.32 billion in sales, which according to Olshan Realty was “front loaded” with 65 percent of the contracts signed in the first half of the year, indicating we may see a slow start in 2023. However, Manhattan’s luxury market this month incidentally saw its busiest Christmas week over the past 10 years with 26 contracts signed, likely due to the average discount of 20 percent.

New York City real estate had its share of highs and lows in 2022, yet one thing that remained consistent and remains true to New York—it’s never boring.

Wishing you a safe, healthy, and prosperous 2023!!