Elegran Brooklyn Market Update: December 2022

Brooklyn Market Update

In relation to its pre-pandemic average (the period Jan 5, 2015 — Mar 1, 2020), Brooklyn’s residential real estate market is hot. White hot. Despite lofty mortgage rates, demand for the borough is nearly 2x that pre-pandemic average, and November’s price per square foot (although not yet final as data continues to post) is approaching the all-time high reached in 2017.

Brooklyn Supply

We glean from the chart directly below that this November’s total supply is quite low compared to the two previous years. However, those years are atypical and total supply has actually been quite steady throughout 2022. New supply, too, is lower than this time last year, yet the seasonal decrease is normal. Note: “Total Supply” refers to inventory on the market at a given time. “New Supply” refers to new inventory that came on the market in a specific time period.

Brooklyn Buyer Activity

Per the first chart below, demand for Brooklyn in November appears quite anemic compared to the two previous years. However, as we’ve discussed, 2020 and 2021 were atypical. Therefore, we’ve included an additional chart to illustrate that demand for Brooklyn, as compared to the pre-pandemic average, has been incredible. Currently, demand for Brooklyn is 2x that average, despite mortgage rates.

Brooklyn Monthly Contract Activity

Brooklyn Market Pulse

Elegran’s Leverage Indicator informs us whether the current is a buyer’s or a seller’s market; i.e, which party possesses transactional leverage. Looking at the graph below, this is indicated by the direction of trendlines. Our indicator also informs us regarding the relative strength of that leverage, indicated by the slope of the trendlines. Per below, Brooklyn is in the grips of a strong buyer’s market.

Price/sf & Discounts

A brief look at the price per square foot bar chart below reveals that price/sf in Brooklyn climbed significantly in November, approaching the all-time high reached in 2017. However, data is still rolling in and we’ll report back next month regarding where November settles out.

Sanguine demand following the pandemic quickly pulled the median listing discount towards zero; however, that number is on the rise again. This is surprising given that demand for Brooklyn remains quite strong, roughly 2x the historical average.

What this means for…

Buyers:

• Because supply became markedly overheated during 2021 and H1–2022, and because price/sf has remained well off the 2015–2019 highs over the past few months (though not yet finalized, November data is proving to be an exception), Brooklyn is currently a strong buyer’s market. Remember, a buyer’s market means that buyers should be rewarded for their patience.

Sellers:

• Although the current market favors buyers, demand is 100% greater than its pre-pandemic average. So, if fairly priced, there are ample consumers in the market to move inventory.
• 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:

• Although peak rental pricing has cooled slightly, rents remain significantly inflated as mortgage rates keep would-be buyers from participating in the for sale market and force them to rent instead.

Investors:

• Strong rents and still-humble pricing (contingent upon finalized November data) create continued opportunities 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 national markets that experienced steep price appreciation over the last 24-months, now overheated with little to no room for near-term growth.

Please contact us if you would like to learn more …