As the year comes to an end, all eyes are watching the happenings in the real estate space. There have been fluctuating emotions in the market as to what the close of the year would be. Still, to get a complete understanding of what is happening presently, we need to start from the standings of the beginning of this year, and trace our steps to this present moment and compare to previous years.
Notable Facts:
- We started the year with approximately 3989 properties in contract to be sold and ended with only 2429.
- Supply began with only 5794 properties on the market, but the number rose to 7692 properties in June and 7757 units in October before closing at 6324 units.
- The number of properties in contract dropped between March and September this year.
- The Federal Reserve rates increased by over 2.36% from March to September 2022, being the highest short-term increase since the late 90’s.
- The number of contracts signed in the final week of 2022 increased drastically, producing over a 22% increase from the previous week.
The Present Market (Weekly Update)
The end of the year is a great time to review what happened in the Real Estate Market in 2022.
Was it a good year to be a buyer?
A Seller?
There have been a few significant changes in our market from the outset. In 2022, we witnessed a considerable decline in the number of properties sold in NYC. We started the year with approximately 3989 properties under contract to be sold but ended with only 2429.
A more surprising aspect of the market change was that pricing did not decline drastically. Why? There was a decrease in the number of properties sold as the demand fell. Sellers took their properties off the market and wanted to list in a more challenging environment.
Let us dive in a bit deeper:
Let's talk about what a typical year looks like for NYC Real Estate. The first half of the year is usually the strongest. People start listing their properties in mid-January, and by April, we have the largest number of listings on the market for sale. As the months continue, more of these listings go into contract.
The number of properties in contract grows throughout the year, and we usually see a slowdown by August as NY'ers go away on vacation and hope to get settled for the following school year. Our second "Season" of the year is between September 15th (After the holidays) till December, when holidays kick in again and the year comes to a close.
What happened in 2022?
The year ended like an average market, similar to where we were in 2019. The first few months of the year were filled with high sales. It was identical to 2021, a record-breaking sales market. The level of sales in 2021 was not sustainable, but the rapid rise in interest rates changed our market.
Early in May, the Federal Reserve announced a hike in the federal funds rate to between 0.75% and 1%. The Fed had previously raised the interest rates by 0.25 percentage point rate from 0.25% to 0.50% in March, the first time since 2018. The rates increased by over 2.36% from March to September 2022.
Looking through existing data, we find a correlation between the Fed rate hike and the stock market's price movements. The Standard & Poor's 500 stock index, a key indicator for U.S. equities, slipped into a bear market and was down 19.44%—its worst year since the 2008's. Within that same timeframe, the properties in contracts also dropped.
The number of properties going into contract dropped in May, and the fall continued until September. Usually, when you see a notable drop in sales, you expect prices to fall as well, as sellers get nervous, run to list their homes, and slash prices. But that's different from what happened in NYC.
The number of properties listed dropped in May, and sellers decided they wanted to avoid entering this market. Those already in the market took their properties off the market. More listings converted from sales to rentals this year than any other year in my career! Even when September rolled around (Our second season), we listed fewer homes for sale than the three years prior.
Once we reached December and buyers realized prices were not falling, and they had fewer choices to pick from, they started increasing their purchases, and December saw a rise in contracts being signed.
This was a very positive and unusual trend, as December is typically when contract signings go down, not increase!
This year's central theme was how we were in a "Shifting Market." We can notice the change in the number of properties in contract year over year in the chart below.
Keep in mind that the dramatic increase in rates by the Fed started in March, and you will see that in April, we saw the market change, and the number of properties going into contract dropped compared to the year prior. It felt like a whiplash of a year due to our recent memory of a 2021 market on steroids!
We have already discussed how we have returned to a more historic market, as we saw in 2019.
This year's central theme was how we were in a "Shifting Market." We can notice the change in the number of properties in contract year over year in the chart below.
Keep in mind that the dramatic increase in rates by the Fed started in March, and you will see that in April, we saw the market change, and the number of properties going into contract dropped compared to the year prior. It felt like a whiplash of a year due to our recent memory of a 2021 market on steroids!
We have already discussed how we have returned to a more historic market, as we saw in 2019.