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The second quarter was truly the tale of two markets. On the one hand, both prices and sales volume were up-up-up. While the data mostly appeared positive, the prevailing sentiment was that the market had seemingly slowed to a halt. The disconnect stems from the nature of the data -- prices and sales volume data reflect closed deals that had been negotiated months earlier, when inventory was relatively scarce and demand was high. And while it's no secret that stock portfolios have been decimated by macroeconomic factors the last year, real estate had been holding up comparatively well -- folks were still getting good interest rates on jumbo loans and they were committed to buying... until they weren't.
After a small dip in April, the market had clearly cooled off by late May. The interest rate hikes finally caught up with buyers, and a hesitancy to liquidate stocks coupled with the belief that the market had become "too hot" made many buyers take the summer off. But perhaps the biggest factor, and what almost always chills our market, is uncertainty. As noise of an imminent recession grew louder and economic indicators (inflation, stock market, etc.) continued on a downward trajectory, many buyers adopted a "wait-and-see" approach which seems to be dominating the summer market. The inventory crunch is over, yet signed contracts are down double-digit percentages. In Manhattan, the market shift is now obvious: year-over-year, there were 5.7% more listings but 24.6% fewer signed contracts.
Looking closer at a month-by-month basis, the shift becomes more clear. Both the higher and lower end of the market (above and below $3.5M, respectively) saw a dip in April which recovered a bit in May, with greater recovery in the higher-end of the market. However, in June, often the busiest time in the market, there was a significant drop in signed contracts in both segments.
The story in Brooklyn is less dramatic but trending similarly. The number of closed sales increased 1% year-over-year despite severe inventory shortages, and Q2 closed sale prices hit the highest values on record ($975K median, $1.261M average, and $905 average price per square foot) - while discounts sank to the lowest level since 2017 (just 3% on average). Again, these figures mostly reflect deals that were negotiated two or more months before closing. Signed contracts were down 21.1% year-over-year, indicating that the record growth trends of the recent past may be slowing.
There continues to be an inventory crunch for townhouses as their share of the market hit an all-time low pushing the average sale price of townhouses up 16.9% year-over-year, surpassing an average of $1.5M for the first time. Condo sales also saw striking price increases, with average sale prices up 14.9% year-over-year. Only coops saw essentially no growth in prices, coming in with a median price $515K, down from $520K in Q2 of last year, and average price $692K, down from $725K this time last year.
Geographically, Northwest Brooklyn, which encompasses highly sought-after neighborhoods like Brooklyn Heights, Cobble Hill, and Park Slope, had the most contracts signed for the quarter, representing 36.3% of all signed contracts borough-wide but only 20% of total inventory, meaning that the lag in activity in other areas is even more stark than the overall picture would suggest. This is especially true for East Brooklyn (which includes Bed-Stuy, Crown Heights, and Prospect Lefferts) and South Brooklyn, which saw no increase in contracts but a marked increase in inventory. While this decline represents a significant departure from the hyperactivity in the Brooklyn market in 2021, dramatic decreases in prices are improbable, given that inventory remains tight, especially in the most in-demand areas and for certain product types (i.e. townhouses).
While it's becoming clear that many buyers have adopted a “wait-and-see” attitude, the shifts in both Manhattan and Brooklyn present a unique opportunity for those willing to make a move in coming months. Sellers have already begun adjusting pricing downward, especially in Manhattan, and anecdotally we know that negotiability is rising. Especially for buyers sitting on proceeds from a recent lucrative sale or otherwise looking to invest their cash, this summer could prove to be a "dip" to capitalize on.
We were honored to be included in the year's Real Trends America's Best Real Estate Professionals List - Ranked #174 By Volume for a Small Team (2-5 Agents) in NYC.
The average monthly rent in Manhattan reached $5,000 for the first time ever last month. The jump is partly a product of some would-be buyers re-committing to renting in the face of increasing mortgage rates. (CURBED)
New York City’s post-lockdown real estate bonanza is over. Contract signings were down last month in NYC and surrounding areas. (THE REAL DEAL)
Despite hitting new records in Q2, there are signs the Brooklyn and Queens sales markets are starting to cool. (BRICK UNDERGROUND)
Sales contracts for Manhattan apartments plunged by nearly a third in June as the city’s scorching real estate market started to cool. While prices haven’t started falling yet — at least not broadly -- buyer attendance at open houses and multiple bids have all but evaporated. (CNBC)
Mayor Eric Adams and the New York City Council enacted the Fiscal Year 2023 (FY23) NYC budget. Budget items critical to the real estate industry, as outlined by the Real Estate Board of NY (REBNY) include:
New Property Tax Rates: Property taxes are ultimately a function of both the billable assessed value and tax rates. In the new budget (effective July 1, 2022 for FY23), billable assessed values increased across all classes, with Citywide taxable assessments up +7.05% overall. In terms of rates, Tax Class 2 Buildings (4+ Unit Apartment Buildings, including Condos/Coops) had its first increase in six years. When you combine changes in taxable assessments and tax rates, Tax Class 2 units will see an average increase of +7.28%, while Tax Class 4 will see an average +6.88% increase vs. last year.
Public Safety: Additional funding for the NYPD; Funding for the Subway Safety Plan; Expansion of the Precision Employment Initiative to connect individuals at risk of participating in gun violence with jobs
Clean Streets and Sanitation: Funding to support increased citywide litter basket pickup; Restored Sanitation Funding
Homelessness Prevention and Affordable Housing Access: Capital funding for affordable housing programs, including HPD and NYCHA; Funding for City FHEPS vouchers; Funding for Drop-in Centers, Safe Haven Beds, and Stabilization Beds; Funding to increase mental health support and outreach for unhoused individuals
Other REBNY Priorities: Additional funding for the urban forest, tree maintenance and tree plantings; Funding to enhance the Office of Building Energy and Emissions (Local Law 97 implementation); Funding to assist with expediting FDNY inspection processes
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