Market Recap - June 2022

Sales

Manhattan sales saw a significant month over month and year over year slowdown in April, with 58% fewer sales than in March 2022, and 33% fewer sales than in April 2021.  Prices remained on the rise, nonetheless, with YoY median listed prices up 17% and average price per square foot up 19%.  There were 3% fewer contracts signed both year over year and month over month, while overall inventory was down 18% compared with March 2022 and 26% compared with April 2021.

Low listing inventory in Brooklyn has kept the record pricing pattern going. The first quarter saw the highest number of sales since 2006 after six consecutive quarters of annual increases. The market share of sales above $1 million rose to a record level. Median sales price reached a new record in the past eight quarters for the seventh time.

Record prices in Queens continue to define the borough’s housing market. There was the highest number of first-quarter sales since 2007 after five consecutive quarters of annual increases. Listing inventory fell year over year for the third successive quarter. Median sales price reached a new record for the fifth time in the past six quarters.

Rentals… 

Re through the roof and “the fever isn’t breaking.” According to the most recent Douglas Elliman Report, there are now bidding wars in one in every five manhattan rental properties, and one in three luxury units.  For context, in April, Manhattan’s net effective median rent rose year over year to a new high at the fastest rate ever, according to the Douglas Elliman Report for the Manhattan, Brooklyn, and Queens rental markets. Manhattan’s net effective median rent of $3,870 in April was up 38.7% year over year ($2,975) and 6.2% higher over the previous month ($3,644). In Brooklyn, the net effective median rent rose year over year to the third-highest level on record ($2,998), a 14.7% increase over April 2021. 

Making matters harder for renters is a decline in available listings. According to the report, inventory saw the most significant decline for the month of April on record, falling 77.3% compared to April 2021. The vacancy rate has been under 2% now for five consecutive months as lease signings (up 6.6% over March) vacuum up listings.  The luxury median rent rose year over year to the second-highest level ($4,600) and bidding wars happened with more than one third of luxury rentals

Mortgage Memo

The average rate on 30-year fixed-rate conforming mortgages in Freddie Mac’s survey climbed 17 basis points to 5.27% in the week ending May 5. That’s the highest weekly average since early August 2009, and 151 basis points higher than it was in the first week of March. The rate averaged 4.98% in April and 4.17% in March. Though mortgage rates have fallen for the second straight week.  Needless to say, refinance volumes are off 72% YoY.

The Federal Open Market Committee raised the range on its target rate by 50 basis points on Wednesday, May 4. This move by the Federal Reserve’s policy-making arm was widely expected and follows a 25-basis point increase in mid-March. The target range is now 0.75% to 1.00%. The median projection of the fed funds rate at year-end 2022 made by FOMC members in March was 1.9%, and the Fed has suggested that another 50-basis point increase may come at the next FOMC meeting in mid-June.  

The Federal Reserve also announced that it will begin reducing the size of their balance sheet by not reinvesting all proceeds from maturing Treasury and MBS holdings, as had been the practice. Beginning in June, no more than $17.5 billion per month of principal payments on MBS will run off the Fed’s balance sheets. In the fall, that cap will rise to $35 billion per month, according to the Federal Reserve’s plan.  Rates have moderated since these announcements, but expect them to be range bound for the foreseeable future.

Mortgage Rates Courtesy of Wells Fargo*

7/1 ARM Jumbo - 4.125% (3.791% APR)

10/1 ARM Jumbo - 4.375% (4.040% APR)

30-yr fixed Jumbo - 4.500% (4.543% APR)

15-yr fixed Jumbo - 4.250% (4.362% APR)

*Rates released 5/23/2022 and are subject to change; purchase points applied

NYC 

Construction pipeline soars 69%!  The city counted 689 new building filings during the first quarter, an increase of 69.3 percent from a year ago and 3.6 percent from the previous quarter, according to a new building construction pipeline report from the Real Estate Board of New York. The number of filings also represented the highest volume for a quarter since 2014.  

Keep in mind, however, that the cost of construction is up approx.. 30% vs. two years ago; therefore, next year’s product (and beyond) will be more expensive resources, in part, are diverted to Ukraine.

But don’t despair!  At least the cost of your Hamptons rental will be less!  The Real Deal reports that a large supply of rentals is forcing owners to cut prices.  ‘Whew. 

National / International 

New home sales fell 5.6% in March to a seasonally adjusted annual rate of 763,000 units, its third consecutive monthly decline. That annual pace tracks just below 2021’s sales of 774,000 units and well above the 2015-19 annual average of 595,200 sales.

The number of new homes on the market at the end of March rose to 407,000 units after seasonal adjustment, up 1.5% from February and 33.4% from March 2021. The share of homes sold in March that were priced at $500,000 or above was 38% of total sales, up from 22% in March 2021.  The number of home sellers lowering prices has reached the highest level since October 2019, the latest sign that the housing market is slowing from its once-frenzied pandemic pace.

Meanwhile. Big-city population declines deepened across the U.S. last year as the pandemic continued sending Americans in search of more space, according to census figures released this past month.  New York, the nation’s largest city, lost 3.5% of its residents, or about 305,000 people. The second-largest city, Los Angeles, lost 1%, or 41,000 people, while the third-largest, Chicago, lost 1.6%, or 45,000 people.  San Francisco’s population fell 6.3%, a loss of 55,000 people. It and Chicago have lost so many people that their populations have fallen close to their 2010 levels.

Hong Kong lost 93,000 residents in 2020, followed by another 23,000 in 2021.  But according to CNBC, estimates show this year will see far more people go as companies move to Singapore and other counties such as Canada and the U.K.  

What does this all mean?  Discounts on properties will be more pervasive as inventory rises and rates remain historically higher, but migration and new supply will moderate the effect.