Current market dynamics signal that a window of opportunity may be opening for buyers this summer. There are three primary factors in play here: availability of inventory, seller willingness to close a deal, and less buyer competition.
Availability of inventory
After falling steadily for more than a year, supply is finally rising in Manhattan, with inventory up 33% year-to-date. This nominal percentage rise in supply would suggest that buyers were spoiled for choice, but in real terms, the increase in supply was mostly muted by equally rising deal volume. For buyers, that effectively meant that supply was low—a nearly equal amount left as fast as new supply came onto the market. However, currently, this net new inventory number – the number of new listings coming to market each month minus units signed into contract or taken off the market – is on track to notch three positive months in a row for the first time since the reopening post-COVID.
In other words, buyers have more choices in a real sense. Instead of seeing one or two possible listings popping up in their feeds each week, they might now see a handful.
The willingness of sellers to close a deal
Seasonality took a backseat during and after the pandemic, but as typical seasonal habits return to normal, the market will return to typical seasonality. In that sense, summer is the slower season for real estate; buyers swap floor plans for beach plans, and sellers cancel open houses for country houses. As activity slows, the more eager sellers will remain focused on doing deals. This will be evident in price cuts and flexible viewing times for listings. As those sales close, this will be evident in rising listing discounts. While this information will not be fully known until the fall, the typical pattern is for discounts to increase over the summer.
Indeed, as the chart below shows, the market-wide median listing discount for units sold in the summer (June to August) is 75 basis points higher, with higher prices seeing higher discounts. With supply rising, expect discounts to rise again this summer, especially if there are fewer buyers competing against each other.
Less buyer competition
Buyers have been out in force for more than a year, setting records for deal volume, but recent contracts-signed numbers suggest the trend is beginning to ebb. In April, the number of deals signed was below that of March and also below those signed in April 2021. Fast forward to summer 2022, and deal volume will be lower still. With fewer buyers competing against each other, sellers will likely look to negotiate with those that show a good faith effort to close a deal.
Wildcards
While COVID cases are rising again in New York, the fear factor is far lower. However, geopolitical stability, economic headlines, and rising interest rates remain in the headlines and any sharp or unexpected event could pause some buyers’ plans. This would seem to strengthen the hand of buyers committed to the market, but while buyers pause during uncertain times, sellers do as well. When their prices seem out of reach, sellers pull their listings. This is seen during bouts of uncertainty or economic instability and periods of market contraction. The net result is that the spread between buyers and sellers grows. In that sense, wild cards represent a Janus-like opportunity: good for opportunistic buyers, but in a tougher environment with inventory contracting and sellers clamming up.
Putting it all together
The summer is looking better for buyers than for sellers. Supply is steadily rising for the first time in nearly two years, just as the level of deals is beginning to slow. Moreover, the slowdown will undoubtedly feel magnified by the usual summer slowdown. Taken together, buyers this summer will have more choice and a chance to negotiate with less urgency. In short, buyers may have their first window of opportunity since the reopening.