Everything shows it goes on and on and on falling housing market on both sides of the Atlantic, with home sales and prices falling significantly, in particular in some areas. Among them are brilliant Manhattan but also one of the most important markets real estate Europe, Sweden. A key role in the pressures housing markets face is both USA and also in Europe height interest rates and stakeholder concerns about possible further increases.

According to a recent study by Douglas Elliman and Samuel Miller, sales in Manhattan fell 38% in the first quarter of 2023 as it became extremely difficult for sellers and potential buyers to negotiate a price. The impressive drop in sales came in addition to an equally significant 29% decline in the fourth quarter of last year. The number of houses and apartments sold decreased in the first quarter to 2242, while in the corresponding period last year it reached 2546. As for price changes, they fell by an average of 10%. Speaking on the subject on CNBC, Jonathan Miller, managing director of research and valuation firm Miller Samuel, believes there will be a market recovery in the spring, but emphasizes that “it will depend to some extent on what the Fed does with interest rates.”

According to agents of the American real estate market, the biggest problem and the main factor leading to a drop in sales is a large gap between the expectations of sellers and the expectations of buyers. The unallocated housing inventory remains relatively low, which means limited opportunities for potential homebuyers in the highly popular Manhattan. As of the first quarter, there are 6,006 homes on the market, slightly less than the five-year average of about 7,200 homes. “There is a mismatch between buyers and sellers,” notes Jason Huber of Compass, who explains that “sellers are reluctant to cut prices to close deals because they are sure they will find another buyer.” As for potential buyers, they seem to be reluctant to buy overpriced properties and pay more than they should as recession risk, stock market volatility and banking crisis.

Rising interest rates and fears of a possible further increase are playing a key role in the pressure on housing markets.

However, buyer interest in luxury homes and apartments remains high, accounting for about 10% of deals made in the first quarter. As noted by brokers and market participants, wealthy buyers often prefer to pay in cash and are thus less affected by rising interest rates. Cash sales reached 57% of total sales in the first quarter, and when it comes to properties worth more than $5 million, the corresponding percentage reaches 75%.

At the same time, house price estimates in Sweden are becoming increasingly pessimistic. According to economists Michael Grann and Teresa Persson, house prices are likely to fall 25% from their February highs, rather than the 20% previously thought. After all, they have already fallen by about 12% compared to the levels of February, and everything suggests that in March they again entered the downward trajectory. During the same period, house prices fell 15% in the Canadian market and 9% in Australian metropolitan areas. However, according to the same economists, prices should stabilize in the summer once Sweden’s central bank, the Riksbank, ends this round of rate hikes. Economists at Danske Bank estimate that Bank of Sweden monetary policymakers will continue to raise borrowing costs again in April, and the increase is likely to be 75 basis points. Last June, the Bank of Sweden raised interest rates by 50 bp. inflation continues to outperform forecasts. Now he has hinted that another 50 basis point hike is imminent, and Riksbank Governor Eric Thedin expressed satisfaction with the fall in house prices, as he explained that falling prices create healthier market conditions.