BROOKLYN REAL ESTATE REPORT:
3RD QUARTER 2023

Brooklyn Real Estate Market: 3rd Quarter 2023 Update

Brooklyn's Real Estate Market Shows Signs of Stabilization Amid Challenges

As Brooklyn's real estate market navigates persistent hurdles, there's a glimmer of stabilization on the horizon, according to the Third Quarter 2023 insights. Despite the lingering effects of record highs in 2022, the current scenario seems less tumultuous. The main issues suppressing market vitality are steep mortgage rates and a critical inventory shortage. However, sales trends are inching back towards pre-Covid figures, indicating a resilient market undercurrent.

Optimism is cautiously building, thanks to expected economic recoveries. Potential market stimulants include a halt in interest rate hikes, lower inflation, and an anticipated resurgence in real estate values. These elements are projected to coax buyers and sellers back into a gradually balancing Brooklyn marketplace.

Yet, challenges persist. Brooklyn's allure has stayed strong, but buyer reluctance and scarce resources have dampened sales activity. The third quarter witnessed just under 1,500 closings, amassing $1.567 billion, representing an over 20% plunge in both the count and value year-over-year, rooted in comparisons with the previous year's near-peak records. Contract signings dwindled, hitting their most deficient third-quarter numbers since 2014, highlighting buyers' apprehensiveness.

Inventory scarcity is a primary market constraint. Active listings dwindled by 20% year-over-year, marking the eighth successive quarter of annual reductions and plummeting to a nine-year low. This contraction affects all property categories, exacerbated by homeowners retaining properties due to favorable mortgage rates and the scant inauguration of new projects in Q3 2023. Nearly all submarkets, significantly two with over a 40% inventory dip, felt this pinch, forecasting continued market influences.

The quarter saw superficial growth on the pricing front, skewed by sales composition shifts. The median price ticked up by 1% annually to $810K, influenced by an uptick in transactions over $2M and fewer in the sub-$350K bracket. This trend, especially pronounced in high-end new developments, nudged average prices and price per square foot by 9% and 5%, hitting unprecedented peaks. Contrastingly, annual figures for resale condos and co-ops softened.

In summary, amid adaptation and challenge, Brooklyn's real estate market hints at a steady comeback. As economic parameters improve, the market awaits a more dynamic resurgence, contingent on inventory replenishment and sustained buyer confidence.

Key Highlights of Sales Data for 3rd Quarter 2023

• Third Quarter 2023 closings fell 29% versus the record high a year ago. The number of sales was actually quite close to that of the quarters preceding 2020.

• Closed sales rose 7% versus last quarter, surpassing the typical second quarter to third quarter growth rate of the past five years.

• Sales volume at $1.567B fell 23% year-over-year but increased 9% quarter-over-quarter. While sales volume didn’t reach the record high levels of Third Quarter 2021 or 2022, this quarter’s volume was higher than every previous third quarter on record.

• Contracts signed fell 23% year-over-year to 743 reported deals, the lowest third quarter since 2014.

Brooklyn Real Estate Inventory Data for 3rd Quarter 2023

• Listed inventory fell 20% year-over-year to 1,558 listings, the lowest total since 4Q 2013.

• Compared to the recent inventory peak in First Quarter 2021, inventory was down 40%.

• Active listings fell 5% from Second Quarter into Third Quarter 2023, atypical of market seasonality. Seven of the last ten years saw large increases from second to third quarter.

• Inventory declined in all price segments. The $750K to $1M range dropped most, down 32% year-over-year. The over $2M segment had the smallest drop, a difference of 7%.

• Listings contracted in most areas except Carroll Gardens, Boerum Hill & Red Hook, where a jump in resale co-op listings drove inventory higher. Brooklyn Heights, Cobble Hill, Dumbo & Downtown declined most drastically with 97 fewer listings. However, Kensington, Windsor Terrace, Ditmas Park, Flatbush & Prospect Park South had the largest percentage decrease in inventory, with 44% fewer listings.

• Inventory fell across all unit types. Studios fell most, down 33% year-over-year. Would-be sellers, especially at the low end, have been hesitant to list given their low mortgage rates

Brooklyn Real Estate Pricing Data for 3rd Quarter 2023

• Brooklyn median price increased 1% year-over-year to $810K. The share of sales over $2M grew, largely due to closings at Olympia Dumbo. Meanwhile the proportion of deals under $350K shrank because of price sensitive buyers worried about mortgage rates.

• Overall average price jumped 8% annually to $1.069M, the second highest figure on record. Average price per square foot rose 5% annually to $1,109. Both figures this quarter were skewed by sales at Olympia Dumbo, which had 16 sales over $2M at $2,062 per square foot.

• Resale co-op average price fell 7% year-over-year due to a drop in activity in high-priced neighborhoods such as Park Slope and Brooklyn Heights.

• Resale condo median and average price fell annually by 2% and 3%, respectively, as the market share of sales under $750K increased. Many buyers have dropped their budgets into lower price segments because of market conditions.

Neighborhoods

Williamsburg & Greenpoint

• Sales fell 12% annually. Umbrella Factory began closings in June, promoting a 19% quarterly increase, but this was not enough to prevent an annual decline.

• Versus last year, active listings slid 24%, yet days on market climbed by one week.

• A heightened market share of Williamsburg condo sales over $1M drove overall median price and average price per square foot up 14% and 1%, respectively.

Brooklyn Heights, Cobble Hill, Dumbo & Downtown

• Sales shrank 23% annually, though its market share of the borough’s closings rose to 15%, the second highest in Brooklyn. Slow sales pushed average days on market to over 90 days.

• Listings fell 26% year-over-year amid limited new listings in Brooklyn Heights and Downtown Brooklyn.

• Resale condo and co-op sales fell 4% and 39% versus last year as limited inventory and high mortgage rates continue to put downward pressure on those two markets.

• Median price decreased 3% year-over-year, but average price per square foot jumped 5% because closings began at Olympia Dumbo in June, just before the beginning of the quarter.

Carroll Gardens, Boerum Hill & Red Hook

• Sales fell 43% annually with all product types experiencing double-digit declines.

• For the second consecutive quarter, Carroll Gardens, Boerum Hill & Red Hook was the only submarket in Brooklyn to experience an annual increase in active listings.

• Price per square foot figures were lower because more large apartments sold. Nevertheless, median price fell 3% annually due to deep declines in resale co-op pricing.

Park Slope & Gowanus

• Closings dropped 19% annually. Although condominium sales rose year-over-year, resale co-ops, which represent a large proportion of the market, fell 22%, driving an overall decline.

• Active listings fell a substantial 41% annually while days on market increased 26% to a month and three weeks.

• Park Slope and Gowanus price figures by-and-large declined as a result of a stronger market share of closings in Gowanus compared to a year ago.

Fort Greene, Clinton Hill & Prospect Heights

• Sales activity fell 30% year-over-year to just under 150 closings.

• Inventory dropped 25% annually, greater than the borough’s average of 20%. Extremely low inventory also limited the annual increase in days on market to just 1%, the least of any submarket.

• Days on market was consistent with last year at 48 days, the lowest in Brooklyn.

• Price figures for this submarket increased across-the-board due to strong resale condo price growth and a number of high-priced new development sales.

Bedford-Stuyvesant, Crown Heights, Lefferts Gardens & Bushwick

• Sales fell 46% annually, the sharpest drop of any Brooklyn submarket. All product types exhibited double-digit decreases in closings.

• Active listings fell 21% annually to under 200 for the first time in three years.

• Days on market spiked 97% to 110 days, Brooklyn’s highest by more than two and a half weeks. A high number of listings that lingered finally sold this quarter.

• Median price for the submarket fell 4% annually to $735K. All product types saw declines in median price as the market share of sales over $1M cooled.

• Average price per square foot climbed 4% year-over-year due to a number of new development sales at 111 Montgomery over $1,100 per square foot.

Kensington, Windsor Terrace, Ditmas Park, Flatbush & Prospect Park South

• Sales in the neighborhoods below Prospect Park fell 22% year-over-year.

• Inventory fell 44% annually. With few new listings, buyers were forced to transact on units that had been listed for longer, forcing days on market up 47% annually.

• Pricing in these neighborhoods was affected by limited sales over $1M; overall median price fell 2%, led by a more than 70% drop in condo sales over $1M.

• Average price per square foot fell a deeper 6%, despite some high-priced new development closings. Larger units traded this year versus last, driving the decline.

South Brooklyn

• South Brooklyn, the largest submarket, led sales for the borough with 437 closings.

• Active listings at over 600 fell the least of any submarket, down 7% year-over-year.

• Days on market bucked the Brooklyn trend by declining 6% annually to under 100.

• A decline in the market share of sales in areas farther out, such as Bath Beach, Midwood and Sheepshead Bay, pushed South Brooklyn median price and average price per square foot up 7% and 4%, respectively, versus a year ago