Rising stock market, fading recession fears fuel sales to wealthy New Yorkers
New York City’s luxury residential market is gaining momentum after stumbling early in the year, another sign that pockets of the U.S. housing market are stirring to life despite high mortgage rates.
Manhattan’s most expensive homes posted their second-best June for contracts signed since at least 2006.
Signs of a potential turnaround have defied expectations that rising interest rates and a weakening economy would keep even the most affluent buyers on the sidelines for much of 2023. Instead, a rebounding stock market and fading recession fears boosted activity among well-heeled New Yorkers.
“People went out and they’re still spending money on good digs,” said Donna Olshan, president of Olshan Realty, a brokerage firm that tracks Manhattan luxury sales of $4 million or higher.
While still slower than the “boom years” of 2021 and 2022, luxury transactions in the first half of this year outpaced prepandemic levels, according to Olshan. A penthouse in the Soho neighborhood that traded off-market for $50 million last month ranked among the most expensive home sales ever to close in downtown Manhattan.
The late “ABC World News Tonight” anchor Peter Jennings’s apartment on Central Park attracted four bids above its $10.45 million asking price and went into contract within two weeks of being listed, according to broker Lisa Chajet.
“Bigger buyers are saying ‘we should jump back in before prices come up again,’” Chajet said.
Zeckendorf Development has cut prices around 5% to 10% to attract buyers of condominiums at 1289 Lexington Ave. PHOTO: DDREPS
New York’s recent strength stands in contrast to the national luxury market, where sales are still significantly behind the last two years and even trailing the prepandemic baseline, said Taylor Marr, deputy chief economist at the real-estate brokerage Redfin.
Luxury sales are also slower than nonluxury sales nationally, he said, indicating that many affluent buyers are still put off by high interest rates and holding off on discretionary purchases including second homes.
After more than two years of booming sales and price increases, the U.S. housing market sank this year under the weight of high mortgage rates. In April, home prices declined year over year for the first time in 11 years.
The national slowdown is being driven largely by the country’s Western markets, with housing prices largely holding up on the East Coast and in the Midwest, said Lisa Sturtevant, chief economist with Bright MLS. High-income suburbs near major cities such as New York and Washington, D.C., have fared particularly well since the pandemic as buyers search for homes in good school districts and owners remain reluctant to sell.
“Low inventory is the key reason why, despite higher mortgage rates, we’re seeing prices holding firm or even rising in many places,” Sturtevant said.
In New York, a disappointing bonus season on Wall Street, where the average payout declined 26% from the prior year to $176,700, was expected to weigh on luxury sales this year. Bankers and other finance workers often use their bonuses as down payments.
But stocks have climbed since last year’s bear market, with the S&P 500 up 14% by the end of June and the Nasdaq notching its best first half of a year since 1983. “On the luxury end, that helped fuel sales,” Olshan said.
Demand for four- and five-bedroom units has increased since mid-May, according to Zeckendorf Development. PHOTO: DDREPS
Incentives on new units have helped. More than half of all luxury home sales this year were closed by developers, who are paying for closing costs and waiving common charges for up to two years, said Laura Tomana, senior vice president, market research and analytics at brokerage Brown Harris Stevens Development Marketing.
On the Upper East Side, Zeckendorf Development has been offering price reductions in the range of 5% to 10% to attract buyers at 1289 Lexington Ave., a new condominium building where units range in listing price from $2.49 million to $9.75 million. Partner Artie Zeckendorf said that more than a third of the building’s 61 units have sold since sales started a year ago.
“We’re willing to meet the market, and we’ve been happy with the velocity that that’s produced,” he said. Zeckendorf Development has seen an uptick in demand since mid-May for four- and five-bedroom apartments.
Olshan cautioned that New York luxury’s strength could wane if the economy slows.
“Interest rates could go higher, the stock market could go a lot lower,” she said. “That would definitely impact the market.”
Source: wsj.com
