2023 2Q Manhattan Market Report
Corcoran Sunshine Marketing Group
After a slow start to the year, the Manhattan market steadied in Second Quarter, showing signs of improvement, though unevenly across sectors.
Several challenges persisted for the Manhattan market in Second Quarter 2023, but a number of positive signs emerged on both a macro and micro level. Many buyers resumed their searches after adjusting to current mortgage rates, and new developments priced to today’s market saw increased absorption. An improved economic outlook coupled with more negotiability activated a resilient luxury market. Still, diminished purchasing power kept the lower end of the market cautious, and constrained inventory in key segments dampened an earnest market rebound.
With just over 3,100 contracts signed, Second Quarter 2023 fell short of the historical second quarter sales average by 10% but mirrored the pre-pandemic springs of 2018 and 2019. While sales gained momentum versus the start of the year, the 6% increase in activity versus a historically low first quarter fell short of the 15% gain typically seen between the first and second quarters. Though yearover-year statistics appear exaggerated by strong 2022 figures, the 23% annual drop nevertheless marks the fifth consecutive quarter of double-digit sales declines for the first time since 2008.
High mortgage rates continue to negatively impact the market, though this disproportionately affects the resale market and lower price points. Aside from in 2020, no other second quarter on record had fewer transactions under $1M (typically 50% of marketwide sales), while sales from $1M to $3M (onethird of the market) fell to a near twelve-year second quarter low. In contrast, over 260 contracts were signed over $5M, a gain of 7% year-over-year. Motivated by the prevalence of discounts and price cuts, the mainly all-cash and discretionary luxury market had one of its best second quarters since 2015. However, sales over $5M+ claimed just 8% of the market in Second Quarter, neither enough to overcome slower sales at lower price points, nor diminish its five years-worth of supply. While there was also a slight uptick in international prospects, their share of purchases remained far below prepandemic levels.
At about 520 sales, new development contracts fell 15% year-over-year. This was smaller than the 26% annual decline in the resale market. New development activity exceeded its ten-year second quarter average by 5%, thanks largely to a small proportion of currently selling new developments that sold significantly more than their fair share; these top performers represented just 10% of currently selling properties but captured 50% of Second Quarter 2023 new development sales. In contrast, nearly one-quarter of properties failed to report a single contract this quarter—many of the same sites that have lingered for years due to a mismatch between pricing, product and location. As a result, several segments of the market remain considerably over-supplied. In Exhibit 7, we explore new development supply and demand by price per square foot and submarket, contextualizing months of supply figures and highlighting the imbalances in Manhattan's new development market. For example, the
new development market over $3,000 per square foot saw about 14 sales per month over the past year but has nearly 1,200 unsold sponsor units; at just 10% of sales but 25% of supply, it would take nearly seven years to sell all of today's sponsor inventory over $3,000 per square foot.
Although real inventory fell 5% annually to approximately 11,000 units, it was still slightly above the longterm second quarter average. The 8% jump from First Quarter 2023 was also greater than the typical 5% seasonal increase from first to second quarter as many sellers delayed listing until the real estate and market economic outlooks improved later in the spring selling season, giving new listings less time to absorb before the quarter ended. Resale inventory fell 3% annually, while new development supply contracted 6% annually.
New launches have been limited this year. Just 140 new development units commenced sales in Second Quarter 2023, adding to the 340 new unit launches from First Quarter. After removing 160 units from supply that converted to rental or were taken off the market due to distress, new development inventory at 4,660 units hit a seven-year low. New development supply is not expected to expand in the near-term, either; we estimate only 770 new units will launch in the second half of this year. That will bring 2023 new introductions to less than 1,100 units, the lowest number Manhattan has seen in 12 years.
Properties that adjusted to current market conditions and instituted price adjustments, greater concessions, and/or increased negotiability were rewarded with sales. This quarter, negotiability deepened to roughly 10% off the last asking price (approximately 20% off original Schedule A), the deepest in two years. Greater discounts and very strong sales at Tribeca Green—a Battery Park City land lease rental conversion—kept new development pricing on its downward trajectory. Average new development price declined year-over-year for the seventh time in eight quarters, falling 5% to $3.5M. New development price per square foot fell 9% annually to its lowest point in three years. Resale condo pricing, on the other hand, approached or surpassed its Fourth Quarter 2021 record highs due to several big-ticket sales over $20M.
Despite ongoing market and economic headwinds, the Manhattan market once again proved resilient in Second Quarter 2023 as supply and demand returned to long term historical levels, and some neighborhoods and price segments even exhibited favorable supply-demand dynamics. Although there remains a notable amount of existing supply that must adjust to meet demand, sites responding quickly to market conditions are selling well. Future quarters will hopefully bring lower interest rates, solid financial markets and an economic soft landing, which will combine with all-time high rents, returning international buyers, and realistic, negotiable sellers to support demand and set the stage for future development opportunities.
Regards,
Kelly Kennedy Mack Ryan Schleis President Senior Vice President of Research & Analytics
With
Sales and Inventory Comparison by Product Type and Price Range
New Development Sales and Inventory Comparison by Submarket and Price Per Square Foot
Pipeline
Fifth Consecutive Quarter of Annual Sales Declines
Total Contracts Signed
New Development Contracts Signed Manhattan sales continued to display annual declines, falling to their lowest second quarter level since 2011 (excluding Second Quarter 2020). Price sensitivity slowed the resale market more significantly than new development demand.
New development sales fell versus a strong 2022, though sales remained above the ten-year average.
Inventory Falling
Listed Inventory + Shadow
Real inventory was 5% below Second Quarter 2022. Supply contracted across all product types.
Over-Supplied Market Conditions Intensify
Months of Supply
Despite declining inventory, slower sales caused months of supply to increase to a two-year high of 12 months.
New Development Pricing Continued to Shift Downward
New Development Average PPSF
Average price per square foot continued its downward trajectory, reaching its lowest level since First Quarter 2020.
New Development Average Price
Near-Term Unit Introductions Limited
2023 New Unit Introductions
Expanding sales of lower-priced inventory drove average new development price down annually for the sixth consecutive quarter. -23% -9% -5% +3.2 months -37% -15% -5% 3,110 $2,376 11,033 12.0 1,086 524 $3.58M
Total 2023 new unit launches are expected to fall below 2022 introductions. The full-year estimate of 1,100 units will be the lowest number of units to commence sales since 2011.