Manhattan was off to the races In January with the strongest sales activity in the last 7 years. Signed contracts were up 26-27% compared to January 2020 and up 57% compared to September 2020. Many properties that had been lingering on the market since early Fall (or before) suddenly received multiple offers in December/January. In the same time period, there was not much new inventory, and anything appealing that came on was snatched up almost as soon as it was listed. While the data shows lower sale prices, the median and average prices were not substantially different than in January 2020, suggesting that the Covid effect was not nearly as drastic as many feared.
Market-wide the sentiment in Manhattan seems to be that the bottom has passed, and buyers seem anxious to make deals happen before prices rebound further. With inventory still tight and buyers on the prowl, we encourage sellers to list now ahead of the Spring burst of inventory.
In Brooklyn, things were quieter as contract activity was even with or below last year's levels and inventory grew. Closed sale prices were higher compared to both December 2020 and January 2020. As sale prices are a lagging indicator, the strong prices are a testament to the strength of the Brooklyn market throughout the Fall, when political and pandemic uncertainties had Manhattan largely paralyzed.
As we enter the new year, we are taking a break from charts or statistical tracking to give you a more holistic recap of the 2020 market. For those of you that are more numerically inclined, fear not -- we'll be back with that sort of analysis in early February to recap market activity and data from the first full month of 2021.
Looking back, the first two months of 2020 were actually quite promising, with renewed activity that seemed poised to reverse the gradual market slowdown that had been ongoing since mid-2018. Then, just before the busy Spring market really got going, the world stopped. Covid effectively shut down all real estate activity in NYC from March 20 to June 28. Several things happened during "NY on Pause." First, virtually any deal that had an accepted offer in early March but had not yet been signed into contract either fell apart or, if the sellers were lucky, was re-negotiated. Deals that were in contract were at best delayed (with most of those closings taking place in June/July) and some buyers even chose to walk away from signed contracts, leaving behind their 10% deposits. Many buyers combed through their sale contracts to find seller defaults to re-negotiate their contracts. As for new deals, there were only a handful of contracts signed, most early on, which were negotiated at deep discounts as uncertainty loomed. With a moratorium on all in-person showings, the market was at a relative standstill. In the early days of the moratorium, with no clear picture of when activity would resume, speculation, uncertainty, and apocalyptic predictions abounded.
Even before in-person real estate activity was permitted to resume on June 28, things had begun to look up. The stock market had begun to climb, while NYC's Covid numbers were finally on the decline. In May and June, some new deals came together. Aside from a handful of outliers, a majority of contracts signed during this time were within 10% of asking price in Manhattan and within 5% in Brooklyn. New listings began to slowly enter the market in June, followed by a surge in the first few weeks of July when in-person showings were able to resume. Listing prices largely remained at pre-Covid levels, as sellers braced themselves for buyers expecting to negotiate. Contract activity picked up, but aside from a small number of new listings that were snatched up immediately, buyer demand lagged relative to the new wave of listings.
The Fall market saw more buyer activity -- showings, inquiries, interest -- but deals were slow to culminate, and new inventory continued to enter the market adding to a growing surplus. Some neighborhoods -- like Midtown -- were hit harder than others, with very little buyer activity even after drastic price cuts on most of the listings. In the deals that did come together, contract prices in Manhattan largely remained within 10% of ask, although some neighborhoods saw far less (or more) negotiability than others. While Brooklyn numbers seemed to track on paper, on the ground activity was less frenzied than in the past. With buyers taking a more cautious approach, days on market figures in Brooklyn had risen borough-wide by the end of the year.
Since the election and announcement of the initial vaccine distribution plans in November, the Manhattan market has regained some ground. By the end of the year, sellers and buyers seemed to be converging. While total number of closings were lower than in previous years, contract activity picked up and ultimately exceeded historical levels in the final months of 2020. Many properties that had been on the market for months suddenly saw an uptick in interest, with a few even receiving multiple offers, pushing sale prices closer to asking than anticipated.
By the end of the year, low rates and negotiability enticed many buyers who were sidelined into recognizing value, especially in the luxury sector which has seen a healthy rebound from a years-long slump. Those looking have flocked toward larger homes with the average square footage of 2020 sold listings up a whopping ~30% compared to 2019. At the end of the day, we have not seen the mass exodus out of the city that many predicted, although Covid did accelerate the move for many folks who were already considering it.
As we enter 2021, we are seeing a significant uptick in activity with our own buyers, and inventory levels remain low, with very few new listings entering the market since the start of the year. It remains to be seen how this dynamic will play out, or if it will continue as we get closer to the start of Spring. Currently, we expect the market to continue improving during 2021, although there are still deals to be had, especially for buyers looking in the areas of Manhattan that were hit the hardest during 2020.
With the Fall market now behind us, two major trends have emerged. First, there continues to be the tale of two Manhattans, mostly dictated by location, with some properties going quickly and at pre-Covid prices and others that continue to languish on the market with little interest. Second, the narrative of Manhattan vs. Brooklyn has shifted. While early data painted the picture of a struggling Manhattan and resilient Brooklyn, contracts and closings since October 15th indicate that some areas of Manhattan are seeing a marked return of buyer interest.
In Brooklyn, which has been relatively more stable, there has also been a gradual uptick in days on market and price reductions/negotiability.
In Manhattan, total contracts signed from October 15th to December 15th was higher compared to the same time last year, a promising sign coupled with a rebound in number of closings, down just ~37% from 2019 levels since October 15th (compared to ~67% during the first 4 weeks of Fall). As a reminder, closings are a lagging indicator, so most closings in late Fall reflect deals that went into contract between July and September. Given the uptick in activity and contracts (especially since the election), we would expect the closings indicators to be even stronger in early 2021.
Downtown gained momentum throughout the Fall season, with declines in days on market, fewer price reductions, and faster absorption than any other Manhattan sub-market. Currently, downtown listings make up less than 30% of active inventory, yet made up 36.3% of closings and 32.3% of signed contracts between October - December 15th. The Upper East and Upper West Sides also saw a healthy uptick in closings compared to earlier in the season, as well as a modest decline in days on market. However, recent Upper East & West Side sales came at significantly greater discounts than earlier in the Fall, with median negotiability increasing from 2% below to 6.3% below last-asking.
The Midtown market remains the hardest hit by COVID, with significantly fewer closings, longer days on market, more price reductions, and greater negotiability than any other Manhattan sub-market. More than 42% of Midtown listings sold since October 15th reduced their asking prices before entering contract (by a median -9.1%), and still closed a median 4.3% below last-asking.
There has been much positive press about the Manhattan luxury market in recent weeks, which had been in decline since long before COVID. In the three weeks following Thanksgiving this year, more $4M+ contracts were signed than during the same period last year, indicating that some luxury buyers have been enticed back by low interest rates and further price reductions in the late Fall market.
In Brooklyn, negotiability, price reductions, and days on market have remained much lower than in any part of Manhattan, but these indicators have gotten weaker as the season has progressed. Since October 15th, days on market and % of listings with price reductions while actively listed increased for homes sold across all sub-markets compared to closings during the first 4 weeks of Fall. Notably, the % of homes sold in BoCoCa (Boerum Hill, Cobble Hill & Carroll Gardens) that reduced asking price before entering contract more than doubled, and homes in all sub-markets other than South Brooklyn saw at least a 10 day increase in median days on market. While the Brooklyn market remains much stronger than Manhattan overall, the urgency that fueled bidding wars and made over-ask sale prices the norm in much of Brooklyn has faded, and Brooklyn sellers have increasingly had to adjust pricing and expectations in order to engage buyers.
Looking ahead, the NYC sales market is traditionally quiet from mid-December through February, although it's hard to predict if this will remain true this year. Anecdotally, the momentum in buyer activity since the election has not yet ebbed, buoyed by optimism for the vaccines, low interest rates, and the perception that the worst for NYC real estate is already behind us.
Our current expectation is that, except for the 2-3 weeks right around the holidays, the market is likely to be far more active this Winter season than in previous years. While we expect activity to be strong, rebounding to pre-COVID (or peak) pricing will take some time as increased buyer confidence will likely be counterbalanced by an influx of new inventory this Spring.