Elegran Brooklyn Market Update: May 2022

Overall Brooklyn Market Update: May 2022

Brooklyn Market Update

April is traditionally one of the busiest months of the year for Brooklyn Real Estate and the month when supply typically peaks for the Spring market. This April, 951 contracts were signed, 5% fewer than last month and 6% fewer than April 2021. From a contract perspective, April marks the first month this year when contract activity has fallen behind pace compared to a year ago. Although, by historical standards, contract activity remains incredibly high, signs are forming that contract activity in the borough may be normalizing. In the face of rising interest rates, a possible recession, continued geopolitical instability and falling equity markets, future demand might be pulled forward to transact sooner. What effect this will have on the transaction volumes over the next six months remains to be seen. On the supply end, sellers have been coming to market to meet today’s demand and supply rose by 5% in April. Homes continue to enter contract quickly, 60 days on median, a decrease of nearly 8% from last month and 24% from last year. Prices have also increased, with the median sales price rising 2% compared to last month and 9% compared to last year to $975,000. The median price per square foot increased 8% compared to last month and 7% compared to last year to $1,012 per square foot. The median listing discount has also decreased from 3.1% to 2.8% in April, indicative of a high frequency of bidding wars.

Brooklyn Supply increased by 5% compared to March, bringing the total supply to 2,631 units for sale. In April, 1,153 new listings came to market, 16% less than March and 22% less than last April. Supply currently stands 23% lower than the same time last year, which coupled with continued robust demand, has driven the Market Pulse Higher, indicating a more competitive market for buyers.

INVENTORY: Key Takeaways

• In the last month, supply increased across most price ranges except for the under $600K and the over $10M ranges.
• Supply increased the most in Park Slope and Brooklyn Heights, up 16% and 14% respectively, in the last month.
• In April, supply of 1-bedroom homes decreased, while supply increased for studio, 2-bedroom and 3+ bedroom homes.
• In the last year, supply has decreased across all price ranges, neighborhoods and home sizes except for those priced $5–10M.

Brooklyn Buyer Activity, as measured by signed contracts, decreased 5% compared to March with 951 contracts signed in April. Compared to April 2021, 6% fewer contracts were signed this year.

CONTRACT ACTIVITY: Key Takeaways

• In the last month, contract activity increased for homes priced $5–10M, while remained flat or decreased for all other price ranges.
• Williamsburg and Park Slope saw an increase in contract activity in the last month, up 41% and 15% respectively.
• Contract activity increased for 3+ bedroom homes, while decreased for homes of other sizes in the last month.
• In the last year, contract activity increased 24% for homes priced $2–5M and increased 140% for homes priced $5–10M.

Despite rising supply and a slightly slowed pace of contract velocity, Brooklyn’s Market Pulse rose from 1.23 to 1.29 in April, reflecting the continued strength of the current seller’s market in the borough.

The Market Pulse [a ratio between pending sales and supply] is an indicator of leverage between buyers and sellers. A Market Pulse below 0.4 is considered a buyer’s market, a Market Pulse between 0.4 and 0.6 is considered a neutral market and a Market Pulse above 0.6 is considered a seller’s market.

MARKET PULSE: Key Takeaways

• In the last month, the Market Pulse rose for homes priced under $1M and those priced between $2–5M.
• Williamsburg saw a 31% increase in its Market Pulse in April which now stands at 1.91, the highest in Brooklyn.
• In the last year, the Market Pulse has increased the most on a percentage basis for the larger and more expensive homes.

Pricing & Discounts

The Median Sales Price in Brooklyn increased 2% from last month and increased 9% from last year to $975,000. On a price per square foot [PPSF] basis, the median increased by 8% from last month and increased 7% from the previous year, to $1,012. Meanwhile, the median listing discount decreased 7% from 3.1% to 2.8% in April, down 39% from last year.

PRICING: Key Takeaways

• In the last month and year, Downtown Brooklyn saw a decrease in median sales price, down 2% to $1,245,015.
• The median sales price increased for 2 and 3+ bedroom homes in the last month, while it remained the same for studios and decreased for 1-bedrooms.
• All neighborhoods saw an increase in the median price per square foot in the last month, and all but Bed-Stuy saw an increase in the last year.

MEDIAN LISTING DISCOUNT: Key Takeaways

• Co-ops experienced an increase in negotiability in April, while discounts in condos and townhouses remained unchanged.
• The median listing discount increased for homes priced under $600K and $1–2M in the last month and decreased for the other price ranges.
• Negotiability decreased in Bed-Stuy and Brooklyn Heights, and increased in Downtown Brooklyn, Park Slope and Williamsburg in April.
• On the median, homes sold at the asking price in Bed-Stuy in April.
• In April, discounts increased for 1-bedroom homes, and decreased for homes of other sizes.

What this means for…

Buyers:

• Buyers continue to face pressure from multiple bidders and rising interest rates, but have a slight reprieve as supply increases.
• Some buyers are accelerating their plans to purchase sooner, given, in part, to rising interest rates.
• Ample new supply is coming on the market this spring, offering new options, and buyers need to be prepared to compete with other ready-to-transact buyers.
• Prices are continuing to increase.
• Given rising rents and current inflation, buying may make more sense than renting today (with a holding period of 3–5 [or more] years).

Sellers:

• Seller competition is increasing as supply increased 5% in April.
• Sellers need to read the market cues and readjust quickly if they are overpriced or mispositioned in the market
• Heading into the summer market, sellers who want to sell should strongly consider listing sooner than later to take advantage of the current market conditions.

Renters:

• Covid-era rent discounts are a thing of the past, as renters experience rapid price increases which are erasing prior discounts and landlord concessions.
• Rents are now back in-line with the increasing trend of the last 5-years.
• Competition remains fierce amongst tenants, with apartments often receiving multiple offers and frequently going to bidding wars.
• Supply continues to trend downward heading into the spring and summer rental market as tenants may choose to renew rather than compete in the competitive market and move.

Investors:

• Rising interest rates should have a more muted effect in Brooklyn, as Brooklyn is less leveraged than most of America, enabling the NYC market to withstand the pressures of ascending interest rates better than many other national markets.
• Leveraged investors, who have a lower interest rate locked in, stand to benefit from the inflationary pressures and rising rental rates. Those investors should continue to hold and experience rising cap rates in the years to come.

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