Manhattan apartment prices fell 5.5% year-over-year in the fourth quarter of last year — the first time that residential real estate values in the borough dropped since the second quarter of 2020.

In the last quarter of 2022, co-ops and condominium apartments in Manhattan were sold for a median price of $1.1 million, according to a report by appraiser Miller Samuel Inc. and brokerage firm Douglas Elliman Real Estate.

Even though sales and prices were still higher compared to the fourth quarter of 2019, there was a sharp drop in listing inventory, according to the appraisal.

The median price of condos and co-ops sold during the fourth quarter of 2019 was $999,000.

The combination of higher interest rates and high prices have led to lower demand, the analysts wrote in their report.

Since the Fed began aggressively raising interest rates in an effort to tame inflation, real estate owners have been hesitant to put their properties on the market since they were bought with mortgages at extremely low interest rates.

The fourth quarter of 2022 saw 5.1% more listings than the previous year, but 15.7% lower than the third quarter and just 1.8% fewer listings than the fourth quarter of 2019.

There were 2,546 residential real estate transactions in Manhattan in the fourth quarter of 2022 — which is 28.5% lower than the same period last year and 6.5% below the fourth quarter decade average.

The average rate of a 30-year, fixed mortgage reached 7.08% during the fourth quarter, which added extra incentive for Manhattan buyers to pay cash.

Of all transactions in the fourth quarter of last year, 55% were all-cash deals — the highest proportion since Miller Samuel and Douglas Elliman started tracking these trends.

Analysts do not believe that the fourth quarter is the start of a severe drop in home prices.

The $1.1 million median sales price in the fourth quarter represents the seventh consecutive quarter above that threshold.

Jonathan Miller, the president of Miller Samuel, told Bloomberg: “You’re going to see a modest decline in pricing over the year, but not a correction.”

He said that tight inventory was “underpinning” the property values, preventing them from going into a freefall.