Rising Mortgage Rates Cool City's Hot Co-op and Condo Market

New York City’s extremely hot co-op and condo market shows signs of cooling as mortgage rates increase and the number of listings struggles to match demand.

Mansion Global reports that the number of contracts signed in Manhattan for co-ops and condos saw slight decreases in April compared to April 2021, which was also the first month-to-month decrease in three months, according to data from brokerage Douglas Elliman. Meanwhile, houses — encompassing single-family and multiple-family homes — saw a  63% increase in contracts due to a significant jump in listings for homes between $1 million and $5 million and for those asking $20 million or more, according to the report. 

“More often than not, markets that saw an uptick in new inventory, saw an uptick in sales, and vice versa,” says Jonathan Miller, president of appraisal firm Miller Samuel and author of the report.

One segment of the market that isn't cooling off is the high end. Manhattan luxury co-ops also saw an increase in inventory, and with more listings, contracts signed for homes priced between $4 million and $4.99 million tripled compared to last year. But those figures are the exceptions to the new rule. 

“I think it is the first time we’re seeing a little bit of the influence of rising mortgage rates, where that has taken some of the edge off the frenzy," Miller says. "But make no mistake, the market is still extremely tight. In Manhattan, where half of the market is cash, the influence of rising mortgage rates is somewhat muted.”

In Brooklyn, trends are mixed. While contracts signed on co-ops increased by 15% and on houses by 61%, condos recorded a 4% decrease compared to April 2021. Like Manhattan, Brooklyn also experienced a lack of new inventory, with co-ops being the only property type to see a month-over-month gain.

Overall, rising mortgage rates are expected to affect the market in the upcoming months. One benefit of the rising rates might be a temporary cool down in the market that can allow the inventory to grow, according Miller. Whether or not rising interest rates can bring galloping inflation under control is another question.