Elegran Brooklyn Market Update: September 2022

Brooklyn Market Update

Brooklyn real estate, measured by contract activity, increased noticeably in August as 10% more contracts were signed compared to the prior month. August marked the first month in five months where contract activity increased compared to the month prior. Based on the seasonal trends, on average, fewer contracts are signed in August than July, and fewer contracts are signed in September than in August. If contract activity this September matches or exceeds the contract activity in August and July, that will indicate the Manhattan market may be accelerating into the fall and winter. This will create more competition amongst buyers, possibly close the window of opportunity buyers enjoyed this summer, and be welcome news to sellers.

Meanwhile, after the stock market had the best month since 2020 in July it ended August lower after the Fed’s comments regarding their intent to continue raising interest rates and keeping them elevated through 2023.Mortgage interest rates also ticked higher in the last week of August.

Importantly, prices in New York City remain healthy and the market fundamentals remain stable and strong. Many national markets, which saw rapid price growth though the pandemic, are now reported to be upwards of 60% overvalued. According to a recent Fortune article, Boise is overvalued by 72%, Charlotte is overvalued by 66% and Austin is overvalued by 61%. Over the years NYC has proven to be more stable and resilient than other national markets. NYC prices do not rise and fall as dramatically, ensuring NYC real estate is an investment vehicle for capital preservation and growth. Buoyed by the strong rental market, desire for diversification and to hedge against inflation, more investors have returned to the NYC market over the summer.

Supply has steadily trended lower through the summer, which is to be expected as many sellers traditionally choose to come to market in the spring or fall and not during the summer. Additionally, 6% more homes were taken off the market in August than July, contributing to the decline in supply. Sellers took their homes off the market for a variety of reasons including choosing to capitalize on the strong rental market and rent their home rather than sell and deciding to return to the market, perhaps at a reduced price, in the fall.

Brooklyn Supply decreased by 8% in August compared to July, lowering the total supply to 3,227 units for sale. In August, 666 new listings came to market, which is less than came to market in August 2020 and August 2021, but above average compared to the volume of new-to-market supply in August 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, increased 10% compared to July as 628 contracts signed in August. Compared to August 2021, 20% fewer contracts were signed this year. Despite the decline in contract volume compared to last August, this year’s contract volume remains well above the average in August of 2015 through 2019.

Brooklyn Market Pulse

Brooklyn’s Market Pulse continues to indicate it’s a seller’s market in Brooklyn despite the Market Pulse decreasing 2.5% in June to 0.76, which is 7% 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 2% in August compared to July and increased 3.5% from last year to $972,050. On a price per square foot [PPSF] basis, the median decreased by 4% in August compared to July and increased 0.4% from the previous year, to $983. Meanwhile, the median listing discount increased from 0.8% to 1.1% in August which is 48% lower than last year.

What this means for…

Buyers:

• Buyers have experienced less competition in the marketplace this summer than they did earlier in the year, and competition may increase as new buyers enter the market in the fall.
• Expect new supply to come to market in September.
• Contract activity accelerated in August compared to July, counter to seasonal trends, a positive indicator of the market moving into the Fall.

Sellers:

• Expect competition in the form of more sellers coming to market in September. Sellers need to carefully monitor the comps and be responsive with their asking prices to stay competitive and relevant to buyers.
• 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 remaining stubbornly high.
• 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 over the last 24-months, and are now overvalued and seeing prices fall.
• 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 …