Signs of firming underlying demand emerged this summer, setting the stage for what could be a ... [+]
As summer fades into fall, subtle shifts in demand seen over the summer suggest that Manhattan might be heading for a busier fall season than previously expected. While the real estate market in the city still felt the quiet gravity of a typical summer season, signs of firming underlying demand emerged, setting the stage for what could be a surprisingly active fall season given the lackluster activity seen over the last few years.
August Market Recap
August 2024 saw 831 contracts signed. While this is 1.3% shy of the seasonal average of 842, it is still 4% above last year's total of 799. The closing of the gap between current and seasonal trends suggests the market is stabilizing after a prolonged "volume trap," where deal activity consistently lagged behind typical seasonal levels for months on end as buyers and sellers waited for other buyers and sellers to act, leading to a vicious cycle of lower inventory and demand. This August’s narrow miss hints that buyer demand may be starting to gather strength earlier than usual.
Manhattan Contracts Signed vs. Seasonal Average
Inventory is Tightening
At the end of August, inventory levels dropped to 5,815 active listings, down from 6,136 in 2023 and 6,430 in 2022. This steady decline of 5.2% from last year and nearly 10% from 2022 underscores the tighter market conditions, even as the summer doldrums mean fewer units are signed into contract. With inventory levels trending lower and buyer activity holding steady, sellers may find themselves with more leverage as we enter the fall season - a far cry from the buyer’s market the lower deal volume levels might indicate.
Manhattan Supply Year-Over-Year
A Less Dramatic Summer Dip in Demand
Another key indicator comes from looking at the change in 30-day deal volume. This year, between July 1 and the week before Labor Day, Manhattan saw a 14% drop in deal volume compared to the 30 days before. While this decline is still noticeable and fully expected for the late summer months, it’s smaller than the drops seen in recent years. Over the same period in the years 2019, 2021, 2022, and 2023, the drop was 18%, 16%, 23%, and 18%, respectively. The softer-than-usual dip suggests that while the summer slowdown is still happening, it's less pronounced. This subtle firming of demand hints that more buyers may be willing to act.
Percent Change In Manhattan 30-Day Liquidity Since July 1
Mortgage Rates Could Fuel Activity—But There’s a Catch
In late August, the Federal Reserve telegraphed that interest rates, after remaining “higher for longer,” may finally be easing soon. This accelerated the nascent downtrend in mortgage rates, providing a tailwind for buyer activity and serving as invisible support for demand. Lower rates can motivate buyers, potentially creating a more competitive environment for fall listings.
However, any potential boost in demand from lower rates is happening against a backdrop of continued economic uncertainty and the looming presidential election. Both factors could temper any surge in activity, with buyers opting to remain cautious until the election is old news and any S&P 500 wobbles are in the rearview mirror. This sidelining effect could keep a cap on activity and price growth. While lower mortgage rates provide an incentive, the broader uncertainty may keep some buyers on the sidelines, limiting upward pressure on prices and keeping the market neutral.
What’s Next for Fall?
Looking ahead, summer’s numbers point to a potentially busier fall season, especially given two-plus years of below-seasonal activity. With inventory already at multi-year lows and buyer demand seemingly firming, sellers may find themselves in a stronger position than expected. However, the market’s direction still hinges on broader factors, such as the downtrend in mortgage rates and ongoing uncertainty surrounding the election and economy.
Advice for Sellers
If you plan to list in the fall, prepare now for a mid-September listing target date. Fall is a compressed active season compared to spring, with only a few months of peak activity that usually ends after Thanksgiving. Even with this recent development, the listing climate is still challenging, so aspirational pricing strategies are not encouraged. The ideal pricing strategy should be to take advantage of the first 30 days of your listing, during the peak fall months of mid-September to mid-November. If you test the market unsuccessfully, listen to what it says and adjust as early as possible to leverage the seasonal uptick before it ends.
Advice for Buyers
The summer provided some opportunities, but a lack of desperate sellers combined with declining inventory options cut the leverage window short. The last few weeks saw leverage shift towards the sell side, so expect a trickier environment to find great deals. The overall negotiability rate is below 5% of the original asking price. This suggests a tight marketplace as sellers either go off-market for a fall refresh or tap the red-hot rental market for a stop-gap measure to wait for a better listing environment. If you have a deal in your grasp, take it. Don’t get too greedy and let a good deal slip away. Remember, you're buying an asset for the longer term in a market that has been underperforming relative to outside markets for years. As 2025 begins rolling into view and uncertainties fade, sidelined buyer interest could re-ignite.
