Elegran Brooklyn Market Update: August 2022

Overall Brooklyn Market Update: August 2022

Brooklyn real estate, measured by contract activity, slowed down considerably in July, with 21% fewer contracts being signed compared to the prior month. While the contract activity trends may lend itself to a short term pessimistic outlook on Brooklyn real estate, buyer activity in the form of inquiries, showings and offers picked up in the second half of July. Has the market seen the low in terms of buyer demand? It’s too early to be certain, however there are positive signals at play.

With the stock market experiencing the best month since 2020, interest rates stabilizing and declining and the 10-year treasury down nearly 100 basis points from its peak, some buyers are starting to return to the Brooklyn market. Buoyed by rising rents and a momentary window of opportunity for buyers, investors (and especially liquid cash buyers) are exploring opportunities to invest.

NYC offers relative value compared to the rest of the US and has seen far less appreciation since the start of COVID compared to most other markets in the US. Herein lies the opportunity to purchase an asset that is not as inflated as other markets, yet, from a historical perspective, has proven to be far more stable. While other markets such as Austin, Boise, Phoenix and Tampa receive attention grabbing headlines of 50 or 75% price appreciation, what’s omitted is the lack of sustainability of such appreciation. Many markets that saw rapid appreciation are beginning to see prices drop as buyer demand cools nationwide. NYC continues to be a AAA investment option for real estate and presents investors with an opportunity to trade out of real estate holdings elsewhere, at elevated prices, and into NYC real estate at a more compelling point of entry.

Buyers active in today’s market are experiencing less competition in the marketplace compared to earlier this year, however, supply is also decreasing as fewer new homes typically come to market in the summer and 43% more sellers took their homes off-market in July than June.

Sellers need to continue to price their homes accurately for the market and pay close attention to homes both on the market and those recently taken off the market. Homes that were recently taken off the market can often be a good indicator of what may have been priced too high, as sellers who may not be getting their price in the summer months take their homes off the market until after Labor Day, which begins the traditional fall activity uptick and when new-to-market inventory typically rises.

Brooklyn Supply decreased by 4% compared to July, lowering the total supply to 3,495 units for sale. In July, 831 new listings came to market, which is less than came to market in July 2020 and July 2021, but above average compared to the volume of new-to-market supply in July of 2014 through 2019.

Note: “Total Supply” refers to the amount of inventory on the market at a given time. “New Supply” or “New-to-Market” refers to the amount of new inventory that came on the market in a specific time period.

Brooklyn Buyer Activity, as measured by signed contracts, decreased 21% compared to June as 572 contracts signed in July. Compared to July 2021, 33% fewer contracts were signed this year. Despite the sharp decrease in contract volume compared to last July, this year’s contract volume remains well above the average in July of 2015 through 2019.

Brooklyn Monthly Contract Activity

Brooklyn Market Pulse

Brooklyn’s Market Pulse continues to indicate it’s a seller’s market in Brooklyn, and the Market Pulse increased 5% in June to 0.8, which is 5% higher than the same time last year. Brooklyn’s Market Pulse remained elevated, despite the recent decrease in contract activity because supply has also continued to trend lower.

Pricing & Discounts

The Median Sales Price in Brooklyn decreased less than 1% from last month and increased 3.6% from last year to $973,650. On a price per square foot [PPSF] basis, the median decreased by 1.5% from last month and increased 0.7% from the previous year, to $1,008. Meanwhile, the median listing discount decreased from 1.1% to 0.8% in July, which is 67% lower than last year.

What this means for…

Buyers:

• Buyers are experiencing less competition in the marketplace than they did earlier this year.
• Supply is also decreasing so there is less choice for buyers and new supply will likely trickle in until after Labor Day.
• Market activity in the form of buyer inquiries, showings and offers picked up in the second half of July after a quiet end of June and first half of July.
• Interest rates have stabilized and even decreased a bit and buyers who pressed pause earlier this summer may want to revisit buying heading into the fall.

Sellers:

• Consider listing before Labor Day, when more inventory is expected to come to market, to stand out to buyers in the market who are eager for fresh listings.
• Pay attention to homes that were taken off the market, as that can be a good indicator of what may have been priced too high.
• Sellers who are not commanding their desired sales price should consider renting their home instead, at least for a year or two, and capitalize on the strong rental market and high rents.

Renters:

• The rental market is as competitive as ever with rents continuing to rise higher.
• Much of the new-to-market rental supply is coming from tenants who received Covid-era rent prices and are now priced out of the apartments as their renewal rents skyrocketed.

Investors:

• Current market conditions create an opportunity for cash-investors (who are either liquid, or able to trade out of another real estate investment) to invest in Brooklyn real estate.
• Brooklyn presents relative value compared to other national markets that experienced sharp price appreciation of the last 23-months and is a more stable investment option.
• The strong rental market may create a price floor for sales prices, offering sellers the option to rent their home for 1–2 years if they are unable to command their desired sales price.

Please contact us if you would like to learn more …