The Market: Q3 Data & Fall Trends
Below is our recap of Q3, reflecting the first three months of resumed real estate activity in NYC, as well as our assessment of the market trends since Labor Day.
In Manhattan, as expected, total number of closings were much lower (-46.3%) compared to last year due to a lack of signed contracts while real estate activity was suspended. Also as expected, new listings poured in as pent-up resale inventory from the Spring finally hit the market. This pushed active inventory levels up 30% versus last year, the fifth highest level in 20 years. Increased inventory coupled with lagging demand, particularly for smaller units, drove up days on market to 143 days from 91 days last year. For listings that have sold, the gap between the seller's ultimate asking price and the recorded sale price ("negotiability" or "listing discount") has widened and is now 8.9% compared to 5.1% last year.
Despite these trends, the median sale price in Q3 actually increased in Manhattan, buoyed by a market-wide shift toward larger apartments and a relative increase in the market share of luxury and new development closings. The median sale price hit $1.1M (more than 7% higher than last year), but this corresponded with a 30% increase in the size of the average home, now a whopping 1,423 square feet. While there were 46% fewer closings market-wide this year than last, the $5M+ market saw only 24% fewer closings, and the market share of three-bedrooms grew (+6%) as that of one-bedrooms declined (-6%). This shift toward larger and more expensive properties may be the result of some luxury buyers seizing the opportunity to take advantage of lower prices in a softening market while those in lower price points have taken a more cautious approach in the wake of COVID.
Early indicators since Labor Day show signs of recovery. In the last month, the numbers of new listings and contracts signed are even with 2019 for the first time since COVID. While buyer activity remains low in some areas and over a third of active listings have had price reductions, negotiability has been shrinking with post-Labor Day sales closing a median of 2.5% below last-asking (versus 8.9% for the full Q3) indicating that sellers and buyers are approaching an equilibrium. With interest rates still low, and sellers increasingly adjusting prices to reflect the current market, we are hopeful that Manhattan sales activity will continue to gain momentum and rebound back to pre-COVID levels.
Across the river in Brooklyn the reported data continues to show resilience in the wake of COVID, with strong buyer demand and minimal negotiability across most of the borough. Signed contracts since Labor Day were up 6% compared to the same time period last year. Notably, the median price in BoCoCa (Boerum Hill, Cobble Hill, Carroll Gardens) now exceeds median prices in all Manhattan sub-markets except Downtown.
Borough-wide, median negotiability since Labor Day was 1.4% (closed sale prices versus last asking price), but this was distorted by sales in South Brooklyn, accounting for more than 40% of all closings, where median negotiability was 3.3%. By contrast, median negotiability was 1.1% in the Brooklyn Heights, DUMBO, Downtown Brooklyn and Fort Greene sub-markets, and in the other sub-markets there was no negotiability.
While reported Brooklyn metrics appear to be extremely positive, we have recently observed a marked change in the pace of Brooklyn sales. Perhaps because of the looming election and continuing uncertainty about COVID, many Brooklyn buyers seem to be more cautious, especially as prices have held steady. The frenzied bidding wars have ebbed, and many properties that would have, in different times, been in contract within days are instead sitting on the market for weeks without any offers. However, unlike in Manhattan where hesitancy has driven prices down, the increased time on the market has not translated to lower prices (at least so far), and sellers in the more expensive sub-markets seem to be getting their asking prices, but with patience. At the same time, because of low interest rates, buyers seem to be more willing to stretch their budgets to get their must-haves (usually outdoor space and washer/dryer) rather than compromise on a more affordable option.