Low Inventory, Rising Interest Rates Slow Co-op Sales

Activity in Manhattan's housing market is slowing down, Crain's reports, thanks mainly to a lack of inventory coupled with rising interest rates, according to the latest report from Douglas Elliman.

Newly signed contracts for co-ops declined year over year in May, and deals have now dropped annually in four of the past five months, the report says. However, the recent increase in mortgage rates did spark an increase in listings for May year over year.

Co-ops were the only specific property type to see contracts drop year over year in May, falling 6.9%, from 721 to 671, while condo contracts increased by a modest 2%, from 545 to 556, the report says.

The most common price point for co-op contracts was between $500,000 and $999,000, with 267 deals, and the most common price point for condo contracts was between $1 million and just under $2 million, with 184 deals.

Listings were up year over year for all three property types, increasing by 0.5%, from 948 to 953, for co-ops; by 17.8%, from 782 to 921, for condos; and by 79.5%, from 39 to 70, for one- to three-family homes.

In Brooklyn, newly signed contracts for co-ops, condos and one- to three-family homes dropped annually for the first time in three months in May, although new listings increased across the board.

New co-op listings increased by 1.7% in May, from 237 to 241, while new condo listings increased by 12%, from 374 to 419, and new one- to three-family home listings increased by 34.6%, from 332 to 447.

Although a lack of available properties has been a major factor behind deals slowing down, rising interest rates are now playing a key role in this as well, according to Jonathan Miller, president and CEO of Miller Samuel and author of the report. "The narrative of 'low supply is restraining sales' is now combined with 'the spike in rates is also creating a drag on demand,'" he said. "It accelerates the affordability challenge that low supply has created."