Manhattan Co-op and Condo Sales Surge on Acceptance of Higher Interest Rates
July 5, 2024 — Buyers are growing tired of paying high rents while rating for interest rates to drop.
Cash was proclaimed king recently when rising interest rates pushed a record number of Manhattan co-op and condo buyers to make all-cash purchases. It's beginning to look like cash should be downgraded to mere princely status.
In a sign of buyers’ growing acceptance of higher interest rates, second-quarter Manhattan apartment sales with mortgages rose from a year ago by a larger percentage, 15.1%, than those conducted in cash, which increased 10.6%, Bloomberg reports.
And this willingness to take out mortgage loans translated into a sales spurt. Closings of co-ops and condos spiked 12.2% in the borough in the three months through June from the same period in 2023, according to appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. While the median price of $1.18 million in the quarter dipped slightly from a year earlier, it was still hovering near a record since interest rates soared in mid-2022.
“Buyers aren’t willing to wait anymore even though rates haven’t cooperated,” says Jonathan Miller, president of Miller Samuel.
When buyers run out of patience, things happen. “As the second quarter began, New York’s real estate market awakened from the doldrums in which it had languished for the first quarter of 2024," Frederick Warburg Peters, president emeritus of Coldwell Banker Warburg, tells CNBC. "Deals in all price categories began to emerge."
High rents in Manhattan are also contributing to rising sales. The average apartment rental price in May was still more than $5,100 a month, and rents tend to rise in the late summer. Many potential buyers who were waiting out the sales market while renting are finally deciding to buy.
“If people were sitting on the fence," Miller says, "the high rents maybe helped push them into the sales market.”
It comes down to a question of picking your poison: stratospheric rents or still-high interest rates.
Interest rates on 30-year fixed mortgages hovered above 7% last week, down from their highs of around 8% in the fall, but still about four points higher than where they stood in 2021. However, as inflation continues to cool, the Federal Reserve has indicated a rate cut could come as soon as the fall. A growing pool of buyers are tired of waiting.