The average 30-year mortgage rate rose to 7.53% in the last week of September — the highest level since 2000 according to the Mortgage Bankers Association. Although inflation has been cooling, the resilience of the United States labor market suggests mortgage rates could rise above 8% by November. While it’s difficult to predict where rates will end up by the close of next year, there’s no reason to expect a drop below 6% anytime soon.
With rising mortgage rates, sales activity in NYC dipped in September, with just 1,539 homes entering contract — a decline of 6.3% from a year ago. Nationally, our colleagues at Zillow expect competition for homes this fall to cool down unseasonably fast, swinging negotiating power toward buyers. However, New York’s market slowdown this autumn will likely be milder than the one expected on the national level, as the city’s severe shortage of newly listed homes will keep its sales market competitive. Many homeowners are locked into much lower mortgage rates than what they would get for their next home. This September, 4,051 homes entered the market for sale in NYC. That’s 8.6% fewer than this time last year — an ongoing trend since summer 2022, though a slightly smaller dip than the national market (down 9.3% year-over-year) according to Zillow.
With limited new listings, the citywide median asking price jumped 11.8% year-over-year in September to $1.095M — almost triple that of the national market, according to Zillow data. With more expensive homes compared to the rest of the country, NYC has traditionally attracted buyers with larger budgets. Less deterred by elevated mortgage rates, these high-budget buyers are doubling down on NYC. As a result, neighborhoods in Manhattan traditionally known for expensive homes continued to see the highest number of newly in-contract listings, with Lincoln Square and Lenox Hill leading the city in sales activity.
That said, NYC’s sales market isn’t impervious to changing mortgage rates, which will remain volatile for the foreseeable future. While far from guaranteed, should mortgage rates rise to 8%, more listings would become out of reach for home shoppers in the city. Buyers have already stretched their budgets at the current rate of 7.53%, which puts monthly mortgage payments at $6,143 for a median-priced NYC home with a 20% down payment. At 8%, the monthly payment on the same home would rise by $285 to $6,428, shrinking the pool of would-be buyers who can afford to stay in the market — and pressuring NYC sellers to reduce asking prices.
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Manhattan Sellers Are Holding Firm
As with the rest of the city, market conditions became more challenging for sellers in Manhattan as higher mortgage rates kept more buyers on the sidelines. Just 651 homes in the borough entered contract in September, down 9% from a year ago. With fewer homes entering contract, Manhattan inventory is recovering from its very low level last year. This September, there were 8,865 homes on the market, a 5.6% increase from a year ago.
Nonetheless, most sellers in Manhattan are holding firm: just 15.6% of the borough’s listings reduced asking prices in September, likely reflecting sellers’ steady negotiating power. While higher than 11.7% in September 2021, when mortgage rates were unusually low, this remains below the pre-pandemic three-year (2017-2019) average of 16.4% for the month.
Meanwhile, the borough-wide median asking price rose 8.4% year-over-year to $1.599M in September — the highest since spring 2018 — as newly listed homes became increasingly expensive in Manhattan. This year, 15.9% fewer homes joined the market than last year, but were 5.1% more expensive, limiting the options for buyers with lower budgets. The price point of new listings has been rising as owners of more expensive homes have more financial flexibility, and therefore may be more willing to list their homes for sale despite high mortgage rates.
Manhattan neighborhoods traditionally known for pricier homes were still able to attract wealthy buyers. The neighborhood with the highest number of newly in-contract listings citywide was the Upper West Side, where 110 new contracts were signed in September with a median asking price of $1.225M. Lincoln Square, a sub-neighborhood of the Upper West Side, was a particularly popular destination for buyers. Bounded by 72nd Street to the north and 59th Street to the south, Lincoln Square accounted for 28% of all new contracts in the Upper West Side in September, and the median asking price of these homes was $1.415M.
In east Manhattan, the busiest markets were along the Second Avenue Subway line. Lenox Hill had the second-highest number of new contracts citywide, with 63 listings entering contract in September at a median asking price of $1.295M. Co-ops dominated the local market in Lenox Hill, with seven out of ten new contracts being co-ops. Farther up Second Avenue, tied for fourth place with Chelsea was Yorkville, where 34 homes entered contract at a typical price point of $749,000. Convenient access to public transportation, plus proximity to Central Park, make these neighborhoods highly sought-after among buyers with larger budgets.
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New Developments Are Propping Up Sales Activity in Queens
In Queens, 337 homes entered contract this September, up 1.2% from a year ago. Steady sales activity in the borough despite increasing mortgage rates may be due to a higher number of listings at more affordable price points, as rising rates limit buyers’ options in other boroughs. While the median asking price in Queens rose 3.3% to $639,500 in September, it’s still far lower than that of Brooklyn ($1.1M) and Manhattan ($1.6M). However, fewer homes are entering the market in Queens than other boroughs. Compared to last year, 18.2% fewer homes were listed in Queens in September, with many homeowners locked into much lower mortgage rates than today’s.
New developments in Queens are contributing to the borough’s steady inventory levels despite the high number of rate-locked homeowners. Since the pandemic, 18,249 new units have been added across 1,120 newly constructed buildings in Queens, according to the NYC Department of City Planning. That’s 12% more than the number of new homes built before the pandemic between 2017 and 2019. The recent building boom has resulted in a rising market share of condos in the area: year to date, 1,625 condo listings have joined the Queens market, making up 26.2% of all new listings in the borough. This is an increase from 20.1%, the three-year average for this number between 2017 and 2019. Furthermore, half of all new condo listings in Queens so far this year were sponsor units in brand new buildings.
With fewer listings coming from homeowners, buyers turned to new developments in Long Island City, which accounted for 31% of all sponsor units in Queens this year. As a result, Long Island City shared the third spot with Forest Hills as the neighborhood with the most contract signings in September. In total, 38 homes entered contract in Long Island City, up from 24 homes one year ago. Of these 38 homes, 30 were sponsor units with a median asking price of $1.168M, a 46% increase from a year ago.
With 31 homes entering contract in September, Flushing scored the fifth spot among NYC neighborhoods with the highest number of newly in-contract listings. New buildings also dominated the local sales market in this Queens neighborhood: about 42% of all homes in Flushing that entered contract in September were sponsor units, a sharp increase from just 7% a year ago. Overall condo listings in Flushing jumped 73.5% year-over-year in September to 262, expanding the options for buyers to consider.
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Brooklyn Remained the Most Competitive Borough for Buyers
In Brooklyn, 439 homes entered contract this September, down 11.3% from a year ago. Despite more modest sales in the borough, inventory is declining as fewer homes are entering the market compared to last year. In September, 16% fewer homes were newly listed for sale in Brooklyn compared to a year ago — the 18th consecutive month of year-over-year declines. The shortage of new listings contributed to tough competition among buyers. An average listing in Brooklyn received 20.6% more inquiries from home shoppers this September than in September 2019. That’s more than triple the rises in inquiries seen in Manhattan and Queens over the same time period: 6.6% and 6.5%, respectively.
Competition was toughest in waterfront neighborhoods in north Brooklyn, as well as areas surrounding Prospect Park. Along the East River, an average listing in Williamsburg and Greenpoint received 28.4% more inquiries this September than in September 2019, as buyers competed for declining condo inventory. Around the park, an average listing in Park Slope, Prospect Heights, Prospect Lefferts Gardens, Prospect Park South, and Windsor Terrace received 45.5% more inquiries in September, indicating the highest competition in Brooklyn. While demand remained steady, buyers had fewer options to consider in these five neighborhoods, where inventory was down 17.2% in September compared to a year ago. This continues a trend observed this summer, in which “brownstone Brooklyn” neighborhoods near Prospect Park, as well as waterfront neighborhoods, are seeing especially fierce competition in the borough.
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As a result, the median asking price in Brooklyn was steady at $1.05M in September relative to the rest of the summer, and was 10.6% higher than a year ago. There were 28 neighborhoods in Brooklyn with a median asking price above $1 million in September, the highest since June 2022. Four new neighborhoods — Bushwick, Ditmas Park, Prospect Lefferts Gardens, and Seagate — joined the million dollar club. Sellers are holding firm on asking prices, and discounts are rarer in Brooklyn than in Manhattan and Queens. Of all listings in the borough, 12.5% lowered asking prices this September, mostly in line with the pre-pandemic three-year (2017-2019) average of 13% for the month.
What Does This Mean for Buyers and Sellers?
While buyers are still competing for well-priced listings, home shoppers now have little room to stretch their budgets due to high mortgage rates. Fewer homes are selling above asking in NYC — a sign of a normalizing sales market. In September, 15.8% of homes sold above initial asking. This is a notable decline from 27.5% in July 2022, the highest share since the pandemic, as the market heated up with buyers rushing to lock in low mortgage rates. As buyers prioritize staying within their budgets, bidding wars will be less frequent in the rest of 2023 and next year.
Buying a home in NYC?
GET PERSONALIZED GUIDANCEWith many buyers on the sidelines, a competitive pricing strategy is increasingly important for sellers. The median asking price of all homes on the NYC market remains elevated, but a typical home sold in Q3 this year was priced 1.1% below comparable homes in the neighborhood. That said, a smart strategy isn’t just synonymous with pricing a home lower than the competition. Digital curb appeal is more crucial than ever, as listings now spend more time on the market compared to the hyper-competitive landscape of early 2022. A recent Zillow survey shows nearly two in five (39%) recent sellers believed better photos could have led to a higher sale price. Beyond photos, an analysis of StreetEasy sales listings found those that included a 3D tour received 10% more views on StreetEasy compared to those without. Listings with a floor plan also received 69% more views on StreetEasy than those lacking one.
With mortgage rates inching closer to 8%, affordability is likely the foremost challenge for the average NYC buyer. However, for home shoppers with room in their budgets to accommodate higher monthly mortgage payments, this fall may be a good time to enter the market, with cooler competition from other buyers and potentially greater room for negotiation with sellers.
The information provided was extracted from StreetEasy listings and its expansive internal database. The contents of this article are intended for informational purposes only and not intended as a complete recitation of the market.
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