Jan 2023 Market Update
2022 kicked off a transitional period in Brooklyn real estate that I expect will continue as the market levels off from the pandemic home-buying mania that began in June 2020. As record-high prices and soaring interest rates clashed, it created a stalemate with buyers that left many listings lingering on the market. It took time, but sellers eventually started accepting lower offers toward the end of the year.
With many buyers still balking at higher mortgage rates (though rates are down about 90 pts since their high point in early November), listings are sitting on the market for longer in NYC, and sellers are increasingly responding by cutting asking prices. However, competition is still intense in some parts of the city, notably in Brooklyn, defying the citywide slowdown in buyer demand.
Compared to the rest of the city, sellers in Carroll Gardens, Park Slope, Boerum Hill, East Flatbush, Bed-Stuy, Canarsie, Brooklyn Heights, and Prospect Heights can expect more inquiries about their listings and less time on the market. Listings in these areas received 43% more inquiries on average in Q4 2022 compared to the rest of the city. With a median of 58 days on market, a typical listing in these ten neighborhoods entered into contract 24 days faster than listings elsewhere in the city (via Streeteasy).
Brooklyn was not entirely not immune to the challenges impacting most price points in the Fourth Quarter of 2022. Increased mortgage rates, a volatile stock market, the midterm elections, and economic uncertainty pushed many potential buyers to the sidelines. A tight supply was also a factor, as inventory in Brooklyn dropped to a nine-year low for a fourth quarter. The reduced stock helped to balance things out and kept the market competitive in many neighborhoods and price points.
While typical for the number of listings on the market to reduce during the holiday season, the inventory slipped further than expected of market seasonality in Brooklyn. For the past five years, every November to December would see a 2% decline in listings. This year the number of Brooklyn listings on the market in December 2022 was down 12% vs. Dec 2021 and down 13% compared to November 2022, much sharper declines than usual. Below are some further stats from the Fourth Quarter of 2022.
Brooklyn:
58% of condo and co-op deals sold below ask in December 2022, pushing overall negotiability almost 3% below ask.
Fourth quarter 2022 closings declined approximately 25% compared to Fourth Quarter 2021, when sales reached the highest level of any fourth quarter on record.
Sales volume followed suit and fell 24% both year-over-year and quarter-over-quarter to $1.626B.
Contract activity declined 43% compared to the Fourth Quarter of 2021, the slowest fourth quarter for contract activity since 2013.
The overall decrease in closings hit resales harder than new development both annually and quarterly because new development contracts are often signed well in advance and would therefore be less likely to reflect the current state of the market.
Despite the decrease in inventory, average days on market was nearly unchanged, growing just 1% year-over-year to 86 days.
Manhattan:
Manhattan had 3,044 closings during Fourth Quarter 2022. While this was a 24% decline year-over-year, it is in comparison to one of the best fourth quarters in over a decade.
Notably, Fourth Quarter 2022 had more closed sales than every fourth quarter from 2017 through 2020.
The decline in sales versus Third Quarter 2022 is typical of seasonality. However, the 27% quarterly drop was the largest for any fourth quarter since 2008.
·Sales volume was $6.04 billion, down 29% year-over-year. Dollar volume was the second-highest Fourth Quarter figure since 2016.
Contract activity had a much more significant decline than closings. There were approximately 2,300 contracts signed in Fourth Quarter 2022, down 43% from 2021 and the slowest Fourth Quarter since 2008.