By now, Manhattan market watchers are used to hearing that Brooklyn and Queens are the hot markets, as evidenced by bidding wars and rising prices. Not so much in Manhattan, which used to simply dwarf the outer boroughs in terms of price and prestige.
I am not here with the breaking news that this trend has suddenly reversed. However, things in Manhattan are… interesting.
There are about 6,115 units on the market for sale in the borough right now, which is about 10% lower than at this time in 2025. And inventory is actually even lower than it seems, since 51% of the listings have been on the market for 90 days or more – many of them unrealistically priced and “stale.” So not only have buyers seen their buying power chopped by recent mortgage rate hikes, there’s also not much out there to woo them into stretching their newly strained budgets.
So it’s no surprise that there were only 588 contracts signed in September, about 14% lower than the historical average. This could be due in part to the fact that many religious holidays fell earlier this year than usual, but whatever the case may be, this is not exactly a booming market.
Unless, and this is where the “Tale of Two Cities” reference comes in, you are talking about luxury listings: anything over $4M. This category was up 22% YTD compared to last year. Meanwhile, among under-$4M buyers, contract activity was actually 18% lower than last year. This stands to reason, because more buyers in the middle and low end of the market are dependent on borrowed money, which just became a lot more expensive. High-net-worth buyers more often buy in cash, and they also have access to portfolio and asset-based lending and other instruments that can mean lower interest rates if they choose to finance a portion of their purchase.
As new development inventory starts to sag (and it will, because while luxury buyers have been on a tear, there are very few new projects in the pipeline), unmet demand will start to push back into the resale market, which as we noted is already suffering from low inventory. And this should put additional pressure on prices.
Additional pressure? Yes, prices are actually on the rise: $1,339 per square foot, up 5.9% year on year. This is based on closed-sales data from July, before the recent rate hikes, so we shall see if this trend continues. Assuming it does, rising prices might be the music that lures more sellers off the wall and into the dance. Moreover, some of these same sellers might also be watching the clock as their 5- or 7-year adjustable rate mortgages (ARMs, many of them at historically low interest rates) get close to a most unwelcome reset. So we could see an influx of new inventory over the next year or two, which could really heat things up – especially if interest rates start to ease…
Beyond interest rates and inventory, there is another macro factor looming over the market: the upcoming election. As we’ve discussed in this report previously, big elections tend to put the freeze on markets. Afterward, almost regardless of the outcome, there tends to be a rush of activity once everyone realizes (again) that the world did not end. Whatever happens, it will not be boring!
Sellers, keep your eye on the market – your moment may be coming.
Buyers, see Tips of the Trade for thoughts on creating opportunities in a dry market: Digging for Deals.
