• The drop in sales and prices follows a 29% decline in the fourth quarter, and suggests that the nation's largest real estate market is correcting after a post-pandemic boom in prices and demand.
• The big question for brokers, buyers and sellers is where the new "bottom" will be in Manhattan.
• Brokers say the biggest challenge for deals is the wide gap between buyer and seller price expectations.

Manhattan real estate sales fell 38% in the first quarter, as buyers and sellers battled over prices and mortgage rates remained volatile, according to new reports.

Total sales volume fell to $4.4 billion in the quarter, with 2,242 apartments and townhouses sold, compared to 2,546 sales in the first quarter of 2022, according to a report from Douglas Elliman and Miller Samuel. The average sales price fell 5% to $1.95 million and the median sales price fell 10% to $1.075 million, according to the report.

The drop in sales and prices follows a 29% decline in the fourth quarter, and suggests that the nation's largest real estate market is correcting after a post-pandemic boom in prices and demand. The big question for brokers, buyers and sellers is where the new "bottom" will be in Manhattan.

"I think we'll see a seasonal uptick in the spring," said Jonathan Miller, CEO of Miller Samuel, the appraisal and research firm. "But some of it depends on whether the [Federal Reserve] holds rates where they are."

Brokers say the biggest challenge for deals is the wide gap between buyer and seller price expectations. Relatively low levels of inventory, or unsold listings, means that buyers still don't have much choice in Manhattan. There were 6,996 homes on the market in the first quarter, slightly lower than the five-year average of around 7,200, according to Miller Samuel.

"There still is a disconnect between buyers and sellers," said Jason Haber at Compass. "Sellers are not slashing prices left and right to get deals done. They have confidence. They feel like 'if I lose a buyer there's another one down the road waiting.' There is a no panic selling, or thinking they have to get out now."

Sellers have trimmed prices, but not enough for today's bargain-hunting buyers. The average discount from the initial list price to sales price in the first quarter price was 7%, up from 5% in the fourth quarter, according to Serhant. "Weary buyers were still in a strong position to negotiate," according to Coury Napier, director of research at Serhant.

Buyers still fear overpaying in the face of a potential recession, volatile stock market and banking crisis. Many brokers say buyers have been calling for months with expectations of price cuts of 20% or more — only to be disappointed.

"Buyers for the last three quarters have been sitting back, waiting for massive reductions and they're not coming," said Noble Black of Douglas Elliman. "And I don't think those big reductions will come."

As Frederick Warburg Peters, president of Coldwell Banker Warburg, said in his first-quarter report, "The big price decreases seem behind us, and property costs have plateaued."

Bidding and interest has remained especially strong at the high end. The share of luxury sales — or deals in the top 10% of the market by price — that resulted in bidding wars rose to a record high of over 11% in the quarter, Miller said. Brokers say wealthy buyers usually prefer to pay cash and therefore are less affected by higher mortgage rates.

Overall, cash deals rose to a record 57% of all sales in the quarter, Miller said. At the high end of the market, three-quarters of all sales over $5 million were all cash.

Brokers say they're seeing signs that the second quarter will be stronger — especially since the higher-end market improved over the course of the first quarter. Sales contracts for properties priced at $4 million or more increased from an average of 16 deals a week in January to 32 deals a week in March, according to the Olshan Report.

Still, a lot depends on the future of interest rates and the overall economy. Because New York City is home to so many buyers and sellers tied to finance, the performance of the stock market could also shape Manhattan's housing market this spring and summer.

"Based on what I see now, we're getting to a healthier place in the spring," Black said. "It's not by any stretch a seller's market, but it's getting busier each month."