Discounts and High Inventory Are Reviving Co-op and Condo Sales

While fears of another spike in coronavirus infections have many people on edge, there are encouraging signs that the pandemic may be in retreat: rising numbers of vaccinated people, declining unemployment, reopening businesses and, now, reviving Manhattan co-op and condo sales.

Apartment sales in Manhattan are out of the red compared to year-ago numbers, according to multiple brokerage surveys, Crain’s reports. The number of deals that closed during the first quarter of the year climbed by nearly 30% from the end of last year, and even outpaced the first quarter of 2020 by just over 2%, data from Douglas Elliman shows.

Those figures were even higher for the brokerage Compass, which reported a 4.8% year-over-year increase in contracts – a sign that the market for co-op and condo apartments might finally be on the rebound.

“The big story for this quarter is not that the market is recovered, but that it is recovering,” says Jonathan Miller, a real estate appraiser and author of the Elliman report. “The first sign of that was that sales rose year-over-year for the first time. That’s big.” But, he’s quick to add, the growth in sales was strong only because prices remain soft.

Apartments are still nearly 10% cheaper than they were at the beginning of 2020, according to Elliman’s report. The average sales price during the quarter dropped to $1.7 million from $1.9 million for the same period last year. Discounts were even steeper on the higher end. For the luxury market, co-op and condo sale prices dropped by more than 15% to $6.5 million over the course of 2020. But most of the activity took place below the $2 million mark. 

Over the last few months, larger apartments were dominating activity as people searched for more space. Studios were among the least demanded apartment type during the fourth quarter of 2020, and that trend has continued into 2021. One to two-bedroom units accounted for most of the sales – 62% of the inventory that was sold, according to Compass, while studios represented 12% of the market, followed by apartments with at least four bedrooms that accounted for 9%.

Meanwhile, cash buyers have taken a step back. They represented 39% of the market this quarter, which is the lowest level in seven years, Miller says – and down from 46% a year ago. That’s largely due to a drop in mortgage rates that make it cheaper to borrow money, but it also has to do with the high inventory levels, which reduce the pressure on buyers to pay cash.