James Morgan, an associate broker at Compass, had two deals over $20 million go into contract in the last month. The first was at One High Line (formerly known as the XI), where the buyer had an already accepted offer on a condo but got outbid at the last minute and had to pivot to the $22.1 million combo with insane views — which he plans to turn into a six-bedroom, six-bathroom spread of 5,400 square feet. The other deal was for a $25 million penthouse at the Armani tower, where Giorgio Armani himself bought a place. Morgan also sold his own apartment at 25 Central Park West — but for far less than he’d hoped to. After an off-market deal for $6.3 million fell through last year, the sale closed for $5 million earlier this month. And that, he says, pretty much sums up the market in 2023: brisk for anything above $20 million and basically lifeless for under $10 million. Which also tells you something about the buyers: Every sale he closed this fall was an all-cash deal. “No one else is making moves,” he says. “There’s just no pressure.”
But the Federal Reserve’s December meeting, during which it forecasted three rate cuts in 2024, has made him cautiously optimistic about next year. “I think all these people who’ve been waiting on the sidelines are going to come back.” Jonathan Miller, of appraisal firm Miller Samuel, agrees, although he wasn’t expecting a banner year, either. “I see 2024 as being a better year for real estate, but not a boom year,” he says. “While 2023 was the year of disappointments, I think 2024 will be the year of incremental change.” Better, maybe not great. Happy 2024!
This was an exceedingly frustrating year for buyers, sellers, and brokers, thanks to a combination of high interest rates and low inventory, which bolstered prices even as it kept many buyers out of the market. The median asking price in Manhattan in 2023 hit $1.1 million, an all-time high, according to StreetEasy economist Kenny Lee, but the number of transactions was way down (14 percent year over year). Most sellers are also buyers, and there’s little urgency for people who locked in mortgages at 3 and 4 percent to sell. And while buyers have largely accepted what they can afford versus what thought they should be able to afford, that doesn’t necessarily mean they’re going for it, either.
So it’s not surprising that when the Fed released its projections for 2024, “there was this euphoria — finally, they’re going to start cutting rates!” says Melissa Cohn, the regional vice-president of William Raveis Mortgage. “But there are going to be bumps,” she warns. “Rates never decline in a straight line. It’s all about the data and what’s happening with inflation. We can’t control everything in our environment.”
Nor does she think that the promise of falling rates will make buyers rush in: “All sense of urgency is just gone. They’ll be dropping rates for the next three years.” And while the promise of lower rates around the corner does make people more optimistic about buying now and refinancing later, it’s expensive to refinance in New York: taxes, fees, and the complexity of co-op and condo purchases versus single-family homes — a bank has to evaluate not just your finances, but the co-op board’s — make it a heavier lift. That, and buyers are now dragging their feet on closings, hoping they might score a lower rate if they delay a little more. “It was bad enough when the rates were going up and people were like, ‘How could you not lock me in?’” Cohn says. “I had a client text me this morning — ‘How dare you lock me in at this rate?’ — I was like, ‘I have to lock in you so we can close.’”
Frederick Warburg Peters, the president of Coldwell Banker Warburg, points out that 2023 wasn’t terrible across the board — condos did decently. “But then you have this whole other thing going on with the co-op market in which the bottom line in many ways is that every co-op needs a renovation and no one wants to do them.” Which isn’t surprising — they take longer than they’re supposed to and cost more than they’re supposed to and the board has to approve them. And no one likes dealing with co-op boards, making them some of the best value plays in the city. That, and “pretty much everyone under 45 wants to move to Brooklyn,” says Peters. “Which is why you can do so well on the Upper East Side. How crazy is that?”
Houses in the suburbs, on the other hand, are nearly as feverishly sought after as they were during the height of the pandemic. In Westchester, Fairfield, and Nassau counties, 40 to 55 percent of the closings are over ask, says Miller, which is because inventory has remained freakishly low. That’s compared to just 5 percent of closings in Manhattan. But as a result, the gap between what buyers can afford in the city and the suburbs has narrowed, which may lessen their appeal in the coming years. Leaving Manhattan behind for a four-bedroom colonial with all the closet space you could ever dream of is one thing. Leaving it behind for a 1,200-square-foot ranch is another.
Of course, predictions are hard enough in any year, but 2024 is going to be especially weird, says Peters. The whole world feels wobbly. “In general, anxious people are slow to make decisions, and I think that’s going to continue to weigh on the market,” he says. “But I also think people get to the point where they just want to sell the damn thing.”
And at the end of the day, exasperation may be as powerful a motivator for some as an interest-rate cut. Julia Boland, an associate broker at Corcoran, says in the last six weeks, she’s put three listings under $2 million in contract. All had recently dropped their prices. At the same time, buyers at the lower end of the market are also reemerging, fed up with waiting, like a family who went into contract on an apartment that needs work in Harlem. “They’d had a third baby and were busting out of their rental,” she says.
The pandemic caused so many upheavals — the rich fled, then they trickled back. Midtown emptied, but this year it was the most-searched neighborhood on StreetEasy. Median prices soared to over $1 million, but largely because interest rates shut out buyers under $1 million. No one could afford to rent, and no one could afford to buy, except for the people who could afford pretty much anything. Rental and sales inventory has remained stubbornly low. But at last, the dust seems to be settling. As Boland put it: “I think 2024 could be the year where many buyers and sellers finally wrap their heads around the new reality.”