Elegran Brooklyn Market Update: January 2022

Brooklyn Market Update

Brooklyn has experienced another record setting year in 2021 with off-the-charts transaction volume as buyers continue to flock to Brooklyn. With it has come increased buyer competition and declining supply leading to frequent bidding wars and rising prices. Renters are finding dwindling supply and rising rental rates, which are up 8% on average in the last year. In December, supply continued to decrease at a faster pace than demand. This has caused the Market Pulse to increase 36% and is now at 1.47, which indicates intense buyer activity and an unprecedented seller’s market in Brooklyn. Compared to last month, in December Brooklyn supply decreased nearly 25% to 2,073 homes for sale, and 733 contracts were signed, a decrease of 12% from last month. Brooklyn supply has not been this low since the end of the COVID shutdown (June 2020). Brooklyn apartments are selling about 15% faster than in Manhattan, with units going into contract within 57 days on the median (10 days quicker than in the city). Brooklyn remains an in-demand and supply constrained market particularly in Park Slope where the median listing discount is -0.5%, indicating homes are selling above the asking price.

Brooklyn Supply decreased by 24.8% in December to 2,073 apartment listings for sale, the lowest level since the COVID shutdown ended in June 2020. Brooklyn supply levels had remained in a narrow channel between 3,200 and 3,400 units for sale over the previous eight months before moving sharply lower in late November and December as buyer demand outpaced new supply.

INVENTORY: Key Takeaways

• Supply decreased uniformly across the price spectrum with the exception of the $10M+ price point, which increased 50% compared to last year (note, small sample size for this market segment).
• Inventory decreased across all neighborhoods and bedroom sizes both compared to last month and year.
• Bed-Stuy continues to represent the greatest number of listings [139] compared to the other neighborhoods, and saw the lowest percentage decrease in supply in the last month.
• Studio apartments accounted for the least amount of inventory available and 3+ bedrooms once again comprised the bulk of the market inventory.

Brooklyn Buyer Activity, as measured by signed contracts, decreased 12.2% from last month as 733 contracts were signed in the month of December. Seasonally, fewer contracts are signed in December than other months, and December 2021’s contract velocity is high when compared to prior Decembers.

CONTRACT ACTIVITY: Key Takeaways

• By price point, contract activity decreased across the board last month, with the exception of apartments priced below $600K, which increased 7% compared to last month.
• The $1–2M price point had the highest number of contracts signed [233], followed by the $600K-1M price range in which 224 contracts were signed in December.
• By neighborhood, contract activity decreased the most in Brooklyn Heights [-50%], and increased the most in Downtown Brooklyn by [+4%]. Park Slope and Bed-Stuy saw the greatest number of contracts signed this month [42].
• In terms of bedroom count, the number of contracts signed this month decreased across the board except for studio apartments, which increased by 27%.
• 3+ bedroom apartments had the greatest number of signed contracts [303], and studios had the least [33].

With sharply declining supply, Brooklyn remains an unprecedented market for sellers with the Market Pulse rising to 1.47.

The decline in supply is primarily responsible for driving the Market Pulse higher. The Market Pulse increased in Brooklyn this month by 36.1% to 1.47, and the Brooklyn market remains firmly in seller’s market territory. Given the declining supply, this is a favorable time for a seller to come to market. Sellers who come to market sooner can experience first mover advantage and take advantage of strong buyer demand and reduced seller competition.

The Market Pulse [a ratio between pending sales and supply] is an indicator of leverage between buyers and sellers. A Market Pulse below 0.4 is considered a buyer’s market, a Market Pulse between 0.4 and 0.6 is considered a neutral market and a Market Pulse above 0.6 is considered a seller’s market.

MARKET PULSE: Key Takeaways

• The market pulse in Brooklyn across all price ranges, neighborhoods, and bedroom counts increased double digits on a percentage basis this month compared to last month.
• The Market Pulse is highest for the $1–2M price range at 1.81, followed by the $600K-1M price point at 1.71.
• The market pulse is above 1.0 in all neighborhoods and bedroom counts. Park Slope saw the greatest increase [67%] and has a market pulse of 3.28, followed by Williamsburg [2.66], which indicates the intense competition amongst buyers in those areas.
• Downtown Brooklyn is a bit less competitive with a market pulse of 1.06, though its Market Pulse is still above 1, indicating a sellers market.
• Across all bedroom sizes, the market pulse increased compared to last year and last month, with 2 bedroom apartments having the highest Market Pulse, followed by 3+ bedroom apartments.

Pricing & Discounts

The Median Sales Price in Brooklyn increased 4.1% from last month to $950,000.

A better measure of price appreciation is the Median Price per Square Foot [PPSF], which was $942 in December, a negligible increase from $940 last month.

MEDIAN PPSF: Key Takeaways

• The median price per square foot decreased across all neighborhoods except for in Park Slope and Williamsburg compared to last month.
• While decreasing in Downtown Brooklyn this month, this area has the second highest median PPSF after Williamsburg.
• The median price per square foot remained lower, by comparison, in Bed-Stuy at $935.
• By bedroom counts, the median PPSF increased across sizes compared to last month except for 1-bedrooms, which decreased 6%. Compared to last year, the median PPSF decreased for all bedroom sizes except for 3+ bedrooms, which increased 17%.

The Median listing discount in Brooklyn increased this month, indicating slightly more negotiability for buyers, despite a rising market pulse. The median listing discount currently stands at 3%.

MEDIAN LISTING DISCOUNT: Key Takeaways

• The median listing discount increased for condos, coops and townhouses compared to last month.
• Townhouses continue to have the highest median listing discount [5.6%] and Condos have the lowest [1.5%].
• By price point, the median listing discount increased for homes priced $1M and below, had no change for $1–2M homes, and decreased for homes prices above $2M.
• Park Slope has a negative median listing discount, [-0.5%], indicating that on the median, homes are selling for half a percent above the asking price.
• In regard to bedroom size, the median listing discount increased for studios and 2-bedroom homes.

What this means for…

Buyers:

• The market pulse is rising as supply has decreased, indicating increased competition amongst buyers for desirable properties.
• After holding steady for 8-months, Brooklyn supply dropped sharply in December.
• Buyers can look forward to new inventory coming on the market in the coming months and it’s important for buyers to get prepared now to be well positioned.
• Park Slope and Williamsburg are incredibly competitive markets with a market pulse of 3.28 and 2.66 respectively.
• Mortgage interest rates are increasing once again, and are projected to increase throughout 2022, potentially spurring buyers to act sooner than later.

Sellers:

• Sellers can realize the first move advantage by listing sooner. While sellers often traditionally wait until late winter or early spring to list their home, with active buyers clamoring for new inventory, sellers can stand out by listing sooner.
• The Market Pulse is rising, indicating a strengthening seller’s market

Renters:

• In the face of rising inflation and increased rent renewal rates, now can be an ideal time to consider buying rather than renting.
• Rental supply continues to decline as tenants are often choosing to renew their leases rather than move into a new rental
• Tenants facing a lease renewal will experience rising rent prices and landlords unwilling to negotiate or offer concessions.
• Competition is fierce amongst prospective renters, with apartments often receiving multiple offers and occasionally going to bidding wars.

Investors:

• With attention on rising inflation, real estate offers a hedge against inflation.
• Rising rental rates are increasing cap rates and creating an incentive for investors to explore investment opportunities in Brooklyn.

Please contact us if you would like to learn more …

About Us

Our goal is simple: to humanize the world of real estate. Michael Rossi founded Elegran in 2008 on the dual premise of motivation and innovation, with a third sustaining principle added over the years: care. Unique in the industry, the firm has quietly become a key player in the New York brokerage world. Elegran oversaw well over $500 million in sales volume in 2019, tripled market share in 2020 and sold $1B in 2021. Headquartered in the center of Manhattan, Elegran is solely dedicated to serving the incomparable needs of the New York City metropolitan region.