Overall Manhattan Market Update: JANUARY 2025

Manhattan’s Market Favors Sellers as Shrinking Inventory Meets Rising Demand, But Success Hinges on Strategic Pricing and Presentation

Manhattan’s residential real estate market ended 2024 on a strong note for sellers, signaling a shift after two years of balance between buyers and sellers. December marked a turning point, with declining supply, rising contract activity, and reduced listing discounts creating a more competitive landscape for buyers while giving sellers increased leverage. As we move into 2025, the market’s trajectory will hinge on the spring season, with new inventory levels and sustained contract momentum shaping how long this seller advantage persists.

However, it’s important to note that this seller’s advantage is not universal. Sellers of well-priced, well-presented, and renovated homes are best positioned to benefit from current market conditions. Conversely, sellers of mispriced, undesirable, or unrenovated properties may not experience the same seller’s market, as buyers remain selective and willing to wait for value.

The Elegran | Forbes Global Properties Manhattan Leverage Index² highlights this shift, indicating growing leverage for sellers amid tightening inventory. December supply fell 16.5% compared to November, reaching 5,243 listings, a notable 8.8% drop year-over-year. Seasonal factors, such as fewer new listings, temporary holiday withdrawals, and steady buyer demand, drove this contraction. The reduced inventory leaves buyers with fewer options and heightened competition. At the same time, sellers benefit from a market that increasingly supports higher pricing and faster sales—provided their properties meet market expectations.

Demand also demonstrated notable strength, with signed contracts up 22.5% year-over-year despite a seasonal decline from November. This marked the third consecutive month of above-average contract activity, fueled by improving economic sentiment, post-election stability, and growing optimism about market conditions. Buyers are navigating a fast-moving market where desirable properties are snapped up quickly, and sellers are capitalizing on this momentum.

Price trends further reflect the shifting dynamics. While the median price per square foot (PPSF) dipped slightly month-over-month to $1,368, it showed a 1.6% increase year-over-year, signaling a market poised for potential appreciation. At the same time, the median listing discount narrowed to 4.4%, reflecting more alignment between buyer offers and seller expectations, further reinforcing the seller’s market dynamic.

Stabilizing mortgage rates, currently hovering around 6.9% for a 30-year jumbo fixed rate, adds another layer of optimism to the market. As economic uncertainty eases, buyers and sellers may feel more confident in making decisions, encouraging continued market activity. However, the spring season will be critical in determining whether this seller-favored market endures or shifts as new inventory levels and buyer activity come into play. With tightening inventory, strong demand, and stabilizing mortgage conditions, the early months of 2025 will set the tone for the rest of the year.

Elegran | Forbes Global Properties Manhattan Leverage Index

The Elegran | Forbes Global Properties Manhattan Leverage Index is powered by four indicators: supply, demand, median price per square foot (PPSF), and median listing discount.  

It informs us whether the current is a buyer’s or a seller’s market, i.e., which party possesses transactional leverage.  Looking at the graph below, this is indicated by the direction of the curve, where:

- An increasing trend from left to right indicates a seller’s market

- A decreasing trend from left to right indicates a buyer’s market

Our indicator also informs us regarding the relative strength of that leverage, indicated by the slope of the curve, where:

- A gentle slope indicates a weak advantage by one party over the other

- A sharp slope indicates a strong advantage

It’s not the exact numbers that matter most - it’s the direction and slope of the trend. Buyers and sellers in Manhattan’s residential real estate market have been locked in a balanced stalemate for nearly two years. This past summer, we witnessed a subtle shift toward a seller-favored market, though buyers briefly regained a slight advantage by September. However, the final quarter of 2024 marked a noticeable swing back in favor of sellers, culminating in December, when the market solidly tilted toward their advantage.

Manhattan Supply

As expected for this time of year, Manhattan’s residential real estate supply experienced a notable decline in December, reflecting typical seasonal patterns. The 16.5% month-over-month drop to 5,243 units was driven by several factors: fewer new listings entering the market toward the end of fall, seasonal withdrawals as sellers temporarily removed unsold properties during the holidays, and steady buyer demand that continued to absorb available inventory. Year-over-year, supply was down 8.8%, further underscoring the tightening market conditions.

What this means for:

• BUYERS: Lower supply generally means fewer properties available, potentially leading to increased competition and the need to act quickly on desirable units.
• SELLERS: Lower supply generally favors sellers, potentially allowing them to achieve higher sale prices.

Looking ahead, while a significant increase in supply is unlikely in the early months of 2025, a gradual rise is expected as the spring selling season approaches. This seasonal uptick could provide some relief for buyers, but current conditions favor sellers, especially those with well-priced and desirable properties. As inventory remains constrained, the balance of power in the market will continue to hinge on the dynamics of supply and demand in the months to come.

Manhattan Demand

Despite the typical seasonal slowdown, Manhattan’s residential market delivered an impressive performance in December 2024, with signed contracts up 22.5% year-over-year, even as they dipped 9.7% from November. The 794 contracts signed mark the third consecutive month of activity exceeding the rolling seasonal average, signaling a market rebound after 16 months of subdued volume.

This upward momentum reflects shifting market dynamics, fueled by changing interest rate expectations, the conclusion of the presidential election, and renewed economic optimism. December’s contract volume stands out as the fourth highest in the past decade for the month, underscoring the market’s resilience and growing buyer engagement despite limited inventory.

What this means for:

• BUYERS: The increased activity year-over-year and rising optimism could signal a shift towards a more seller-favored market, making it more challenging for buyers to negotiate terms.
• SELLERS: Sellers may achieve higher sale prices, especially for well-priced and desirable properties.

The strong contract activity highlights a renewed sense of urgency among buyers, making the market increasingly competitive and offering sellers well-positioned properties a clear advantage heading into 2025.

Manhattan Median PPSF

Manhattan’s median price per square foot (PPSF) for residential apartments saw a modest 1.1% month-over-month decline in December 2024, settling at $1,368. This slight dip likely reflects deals signed earlier in the year under different market conditions. However, the broader picture remains positive, with a 1.6% year-over-year increase signaling a potential shift toward sustained price appreciation.

This upward trend is bolstered by the recent resurgence in market activity, driven partly by the Federal Reserve’s interest rate cuts, which has boosted buyer confidence and demand.

What this means for:

• BUYERS: while the short-term decline in PPSF may offer some relief, the year-over-year growth and the potential for future appreciation suggest that prices may continue to rise. Buyers should carefully consider their budget and be prepared to act quickly in a competitive market.
• SELLERS: The year-over-year growth in PPSF and the market's potential for appreciation are positive signs for sellers. They may achieve higher sale prices and experience shorter time-on-market for their properties.

The combination of strengthening pricing trends and increasing market momentum points to a more competitive environment as 2025 unfolds, favoring sellers with well-positioned properties.

Manhattan Median Listing Discount

The median listing discount for Manhattan residential apartments narrowed to 4.4% in December 2024, reflecting a 0.3% month-over-month decline and a 0.7% decrease year-over-year. This continued contraction signals a modest yet consistent strengthening of the seller’s market as buyers show an increased willingness to meet sellers closer to their asking prices.

 What this means for:

• BUYERS: As seller pricing power increases, buyers may need to be prepared to pay closer to the asking price or even offer above it in a competitive market.
• SELLERS: The decreasing discount indicates a shift towards a more seller-favorable market. Sellers may achieve higher sale prices and experience shorter time-on-market for their properties.

The growing alignment between pricing expectations and market realities further solidifies the competitive advantage for sellers of well-priced and desirable properties. As inventory remains tight and demand steady, the reduced discount underscores sellers' increasing leverage in Manhattan’s residential market.

Rental Remarks

In November 2024, the median rent in Manhattan decreased by 0.7% compared to the previous month, reaching $4,170. Despite this month-over-month decline, year-over-year data shows a 4.4% increase, marking the second consecutive monthly rise in median rent. New lease signings have also increased annually for the past eight months.³

Mortgage Remarks

The 30-Year Fixed Rate JUMBO Mortgage Index is currently trending at 6.9%⁴, with the average JUMBO Annual Percentage Rate (APR) at 6.8%⁵. Although these rates had decreased in late August and into mid-September, they have since risen by 80 basis points after hitting a low in mid-September.

As economic uncertainty diminishes, interest rates are expected to stabilize. This stabilization should provide much-needed certainty for both buyers and sellers, encouraging transactions and easing market gridlock. A more predictable interest rate environment can boost confidence in the real estate market, leading to increased activity and smoother transactions.

Investor Insights

The total return on real estate investments is driven by net rental income and capital appreciation. Manhattan cap rates are currently between 3% and 3.4% for all-cash investors. Unfortunately, investors using a large percentage of leverage face challenges in generating net income, given the average JUMBO mortgage APR of 6.8%. Timing and a strong USD may afford foreign investors, depending on their native currency, the opportunity to realize significant capital gains upon selling their assets.

References

1. Data courtesy of UrbanDigs

2. According to the Elegran | Forbes Global Properties Brooklyn Leverage Index

3. Data courtesy of Miller Samuel, Inc.

4. Data courtesy of Federal Reserve Bank of St. Louis

5. JUMBO mortgage rate APR data courtesy of Bank of America, Chase, and Wells Fargo

If you would like to chat about the most recent market activity, feel free to contact us at info@elegran.com or connect with one of our Advisors.

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