Looking ahead, rising mortgage rates are expected to cool the market and allow stock levels to rise 

New York City’s extremely hot home market shows signs of slowing down as mortgage rates increase and the number of listings struggle to match demand.

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 a slew of data from brokerage Douglas Elliman on Thursday.

On the other hand, 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,” Jonathan Miller, president of appraisal firm Miller Samuel and author of the report.

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. 

The number of contracts for trophy condos and houses priced at $20 million and above also increased by 7% and 50% respectively.

“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. But make no mistake, the market is still extremely tight,” Mr. Miller said. “In Manhattan, where half of the market is cash, the influence of rising mortgage rates is somewhat muted.”

In Brooklyn, while contracts signed on co-ops increased by 15% and on houses by 61%, condos recorded a 4% decrease compared to April 2021.

Contracts for luxury condos and houses in Brooklyn priced at $5 million and above also recorded a year-to-year increase. 

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 to Mr. Miller. 

Reprinted from Mansion Global, May 2022