First Quarter 2023 reinforced the newfound challenges that face the Manhattan market. A variety of economic factors caused trepidation among buyers, especially interest rate hikes, stock market fluctuations, and the recent bank collapses. In turn, many sellers reacted to diminished demand and longer marketing times by lowering prices and deepening negotiability to attract nervous buyers.
Market wide closings registered 2,500 sales, returning to the pace seen during the first quarters of historically slower years from 2018 through 2020. First Quarter 2022, on the other hand, had set a fourteen-year record high for first quarter sales, exaggerating the 38% year-over-year decline.
While the overall number of contracts signed was also significantly below last year, the Manhattan market gained some momentum during the quarter. The yearover-year decline in contracts tightened from 37% below 2022 in January to 20% in March, with a notable uptick in activity starting mid-February. Unsurprisingly, slower sales and an uncertain market outlook caused inventory to increase.
Although growing at a slower pace than any quarter last year, inventory was up 3% annually to 6,120 active listings. Notably, the year-over-year increase in inventory is in comparison to a five-year low and inventory is still 13% below the historical first quarter average. Furthermore, the annual increase in listings was attributed only to those priced over $1M, which grew 12%. Listings priced under $1M fell 13% annually.
This inventory constraint in lower cost price segments is likely also a contributing factor causing fewer sales. Average and median price declined for the second consecutive quarter. The increased price sensitivity in the market expanded sales at the low-end, particularly resale co-ops, which declined at a slower rate than other types.
Smaller, lower-priced residences had seen their demand erode in the post-pandemic recovery as buyers sought larger spaces and took advantage of low mortgage rates. However, in First Quarter 2023, sales under $1M comprised 50% of Manhattan closings, their highest market share in three years.
This drove median price to its lowest point since the market pause and average price to a two-year low. Conversely, average price per square foot of $1,890 was supported by sales in super-prime locations, reaching its second-highest level in four years.