Fed Up With Waiting, Manhattan's Wealthy Return To The Luxury Market – 'New Normal' Of High Rates Accepted As Sales Climb 3.7%

Manhattan's luxury real estate market experienced a surge in activity at the end of the year, driven by a confluence of factors.

Affluent buyers, previously hesitant because of rising interest rates, reentered the market, buoyed by stock market gains and the presidential election’s outcome.

According to a Douglas Elliman report, luxury apartment sales in Manhattan, representing the top 10% of co-op and condo transactions, increased by 3.7% year-over-year in the fourth quarter. However, the total number of luxury deals dropped by 10.7% compared to the previous quarter, likely due to a temporary decline in mortgage rates during that period.

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The recent surge in luxury sales in the third and fourth quarters suggests buyers have "accepted the new normal" of higher interest rates, according to Leonard Steinberg of Compass, which released a market report on Friday.

However, activity in the luxury market remained somewhat erratic throughout the fourth quarter, as evidenced by the weekly Olshan Report, noted Frederick Warburg Peters, president emeritus of Coldwell Banker Warburg, in his report.

According to Peters’ report, weekly sales for homes priced at $4 million or more fluctuated between 19 and 39 contracts, with two of the most active weeks occurring during the fourth quarter.

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"As was evident with the rise in the stock market, the Republican victor soothed financial nerves, at least for now, by clearly signaling the return of a period of reduced regulation and taxation for the affluent," Peters said.

The luxury Manhattan real estate market saw significant growth in the fourth quarter. According to Douglas Elliman, median sales prices surged 6.5% annually and 13.3% quarterly, reaching $6.525 million.

The surge can be attributed to several factors.

"Inventory is tighter and equities markets are up – way up – in some instances 30% higher than they were in 2019," Compass broker Daniel Blatman said in the company's report. "Buyers are wealthier and have been sitting on their money, ready to engage. They are now engaging."

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The increased buyer activity coincides with a decline in luxury inventory. After three consecutive quarters of growth, the fourth quarter witnessed a significant drop in available homes.

Jonathan Miller, president and CEO of Miller Sammuel and author of the Douglas Elliman report, confirmed the trend. Manhattan's luxury housing market saw an 8.1% annual and 18.1% quarterly decrease in available properties.

"The below-average quarter for new listings combined with strong contract activity and very few new development introductions [drove] listed inventory to its lowest fourth-quarter figure in nine years," according to a report from Corcoran.

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