Elegran Brooklyn Market Update: July 2022

Overall Brooklyn Market Update: July 2022

Brooklyn Market Update

The Brooklyn market noticeably slowed down this June, compared to June 2021, although, in comparison to 2014–2019, the market remains very active. Contract activity in June is down 28% compared to June 2021 and supply is down 23%. By comparison, contract activity in Manhattan is also down 28% compared to last June, while supply is only down 10%. Consequently, Brooklyn’s market remains tighter [more supply constrained] than Manhattan, despite a comparable slowdown in contract activity. This is evidenced by both how quick homes are going into contract and the small median listing discount. In June, homes entered contract in 45 days on median, 15% quicker than May and 27% quicker than last year. The median listing discount was 1.1% in June, a sharp drop from last month and down 60% compared to a year ago. The median sales price decreased 1.5% compared to May to $965,000, but is 4% higher than last year, while the median price per square foot rose half a percent in the last month and rose 1.7% in the last year to $1,037.

In the face of growing uncertainty, rising interest rates and falling equities, some buyers are pressing pause. As a result, the market is slowing and liquidity is decreasing. For sellers, this means it will take more time to sell your home and you’ll likely need to reduce your asking price or offer a larger discount. For buyers, this means you’ll experience a market with less competition and a bit more negotiability. Cash buyers may experience even greater negotiating power [compared to financing buyers] as there is less uncertainty for a seller.

Investors too are making their way back to Brooklyn real estate. As rents increase, investors are seeing an increasing return on their investment. Strong rental prices can create a price floor for the sales market, as it creates both demands for investors to purchase property and it creates an alternative for sellers unable to command their desired sales price.

The Brooklyn market remains hyper-local and specific micro-markets may already be luke-warm or may be red-hot. Whether you are a buyer or seller, It’s important to speak with your real estate advisor to assemble your gameplan.

Brooklyn Supply increased by 3.7% compared to June, bringing the total supply to 2,687 units for sale. In June, 998 new listings came to market, which is less than came to market in June 2020 and June 2021, but significantly more than came to market in June 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 13% compared to May as 730 contracts signed in June. Compared to June 2021, 28% fewer contracts were signed this year. Despite the sharp decrease in contract volume compared to last June, this year’s contract volume remains well above the average in June of 2015 through 2019.

In the spring of 2021, slightly more than 1,000 contracts were being signed each month, an off-the-chart record for the last decade. Contract activity then proceeded to decline last summer, hitting a low of 650 contracts signed in September, before rebounding earlier this spring, peaking in March 2022 with 988 contracts signed. Since then, contract activity has declined each month, as is seasonally expected. Importantly, contract velocity in Brooklyn remains well above pre-Covid levels, the result of a confluence of factors including the increased development within Brooklyn, the trend of buyers flocking to Brooklyn to obtain more value than in Manhattan and a Covid-fueled boom, whereby buyers sought out Brooklyn as both a refuge from Manhattan and as an alternative to the suburbs. While Manhattan’s recent contract activity has returned to historical averages, and is poised to dip below those averages this summer, Brooklyn [for now] remains well above such averages, although the gap is narrowing.

Brooklyn Market Pulse

Brooklyn’s Market Pulse decreased 13% in June to 1.15, which is 20% higher than the same time last year. Brooklyn’s Market Pulse remained elevated, despite the recent decrease in contract activity because supply has remained stable and relatively low through the traditionally busy spring season. Brooklyn’s Market Pulse has remained above 1.0 since Thanksgiving 2021, a result of there being more homes in contract [pending sales] than listed for sale [available supply]. The Market Pulse may continue to trend lower through the summer months, indicating some leverage shifting away from the sellers.

Pricing & Discounts

The Median Sales Price in Brooklyn decreased 1.5% from last month and increased 4.3% from last year to $965,000. On a price per square foot [PPSF] basis, the median increased by 0.6% from last month and increased 1.7% from the previous year, to $1,037. Meanwhile, the median listing discount decreased from 2.9% to 1.1% in June, which is 60% lower than last year.

What this means for…

Buyers:

• Buyers may experience a less-competitive market this summer offering more negotiability as some buyers press pause in the face of rising rates.
• Interest rates have ticked down slightly in the second half of June. Interest rates on jumbo mortgages remain lower than conforming loans.
• Contract activity is 28% lower this year compared to last year, but remains well above historical averages.
• In the last year, the median sales price has increased 4.3% and the median price per square foot has increased 1.7%.
• Cash buyers should have more negotiating power than financing buyers as there is less risk in a cash deal for a seller.

Sellers:

• Thinking of listing this fall? It may be beneficial to list this summer and face less competition and supply still remains tight in Brooklyn.
• Fewer homes are coming to market this year than last year, exacerbating the supply demand imbalance.
• Homes continue to be sold quickly for very little discount in June.
• Sellers on the market longer than 60-days need to adjust their asking prices.
• Sellers unable to command their desired asking price should consider renting their home instead to take advantage of the elevated rents.

Renters:

• The rental market is competitive as ever in the traditionally busy summer market.
• Between existing tenants renewing their lease rather than moving, and a steady flow of recent graduates moving to NYC, the rental market is very tight, resulting in rising rents, lines at open houses and often multiple applications per apartment.

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.
• 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 …