There are times when markets behave like someone starting the new year with half-baked resolutions, grand plans and perhaps a few great intentions. Let’s dive into the data and try to prognosticate what the future holds in the city where the future comes to audition.
For the Manhattan sales market, we are seeing further compression on the supply side with 5,271 listings, down 10.4% from last month. While this is typical in terms of seasonality, listed inventory is down 7.7% from a year ago. Now let’s flip the script for a moment. While we have less listed inventory than from a year ago, we had a 22.1% increase in contracts signed in December compared to the previous year. Pending sales are up 20.8% from last year. In terms of the current mortgage climate, we have had some rate increases over the last several weeks.
The Fed cut rates three times in 2024. Markets are anticipating that the Fed will cut interest rates in 2025, but not by much. While the Fed does not directly set mortgage rates, it heavily influences them. It adjusts the federal funds rate based on the economy, which impacts banks’ borrowing costs and the prime rate—the basis for loan APRs, including mortgages. Lenders then add their own margins, causing rates to vary by lender. In terms of the mortgage environment, the worst-case scenario appears to be that mortgage rates will remain fairly stable throughout the year. On the positive side of the ledger, Zillow is predicting a return to historic norms with mortgage rate improvements for the year.
What does this mean for buyers? In the immediate, it may be an ideal time for a buyer to find value this quarter, before the anticipated spring inventory surge. Purchasing early may also be a way to get ahead of potential price increases if we end up seeing improving mortgage rates.
Moving on to rentals, we have some indicators of a tightening rental market. Median rent rose 7% year-over-year, with a 3.7% increase in the average rental per square foot year-over-year. New lease signings continue to show strong annual gains, up 18.2% with a 27.8% increase in listing inventory.
What does this mean for renters? For those looking to rent, the increased inventory trends from last year are expected to continue this year. This means tenants will likely have more options, helping to curb the extreme price spikes often seen in some competitive markets. It may also be a good time to look for deals on rentals before we get into the busier rental season which will still bring higher prices, even if the additional inventory ultimately leads to price stabilization.
The opportunity for buyers, renters and sellers alike is strong. It may require a bit of timing and ingenuity, along with the assistance of a great agent, but there is still time to close on some new resolutions.
