Manhattan And Brooklyn – It’s All About Price

Research for Manhattan and Brooklyn real estate suggests a cautiously improving market. Overall contract activity is up modestly, and it seems as if buyers are gradually returning. However, beneath those aggregated numbers, a much more nuanced story is unfolding across Manhattan and Brooklyn.

To add a qualifier to the old adage: real estate is location, location, location, and price.

In both boroughs, the real estate market is essentially split into two. It’s not a geographic boundary, and it has nothing to do with property types. It’s all about price. The luxury sector, roughly defined as units priced at $4 million and above in Manhattan and $2 million and above in Brooklyn, is behaving much differently than the non-luxury market.

The key driver is interest rates, as can be seen when looking at the number of cash versus financed transactions in Manhattan. As the pandemic recovery got underway in mid-2021, nearly 60% of Manhattan purchases were financed. Today, 69% of purchases are cash.

Since the Federal Reserve began raising interest rates in 2022, mortgage rates have risen dramatically. While it’s old news at this point, the rising home payment costs have had a chilling effect on buyers who rely on financing to make a purchase. A mortgage on a $1.5 million apartment today costs hundreds of dollars more per month than it did in 2021. Meanwhile, luxury buyers, who often pay cash, remain largely unaffected. The result is a multi-year disconnect between the luxury and non-luxury segments of the markets.