The housing reports are in, and the challenging market in Brooklyn has continued along a trend of gradual declines in prices and sales.
Prices have fallen since this time last year across all unit types excluding co-ops, according to a report by Douglas Elliman. While overall sales have also fallen annually for the seventh quarter, sale prices for co-ops set a record after rising annually for three quarters. New developments also fared better than resales in terms of pricing, although luxury sales overall decreased in price by 6.2 percent to $2,343,851.
“Brooklyn has for 5-6 years been a success story, a global brand, but it still responds to supply and demand,” said Jonathan Miller, real estate appraiser and CEO of Miller Samuel. “Buyers are plentiful, but they’re wary. It’s on sellers to come down to market conditions.”
He attributed this wariness to a number of factors from new taxes to the trade war to talk of a possible recession to uncertainty about economic policy coming out of Washington.
“Uncertainty is the new word replacing location,” quipped Miller, who authored the Elliman report. “What do consumers do when they’re uncertain? They pause or they take longer to make decisions.”
That said, he believes the market would be in worse shape if mortgage rates haven’t dipped as low as they have.
“I don’t want to say we’re on the edge of an abyss because I don’t believe that,” said Miller. “It’s a period of economic uncertainty and the way you get through this as a market is time has to pass. I’m not saying people shouldn’t be concerned, but I do think this we’ve seen an exaggeration in the state of conditions.”
High-end home buyers racing to beat new Mansion Tax, which kicked in on July 1, had an impact on the market from quarter to quarter although Halstead reports that the average Brooklyn apartment price of $843,685 in the third quarter was just below 2018’s Q3.
“The rush to close before these taxes took effect inflated some second quarter data, while stealing closings from the third quarter,” the report concluded.
This view was echoed by Miller, who said that when looking at the two quarters together, sales are only down two percent from Q2 and Q3 2018 together.
Miller was hesitant to refer to current market prices as a correction, instead describing it as a “pivot” from one to two years ago when sales were “flirting with records,” because it generally takes a year or two for sellers to capitulate to new market conditions. Supply is also nearly twice as high as it was two years ago and Miller argued that when looking at the rate of housing stock becoming available vs. sales, the borough is generally healthy, even more so than Manhattan.
Breaking price down by unit type, Douglas Elliman reported condos sold for an average price of $1,053,084, down from $1,116,516 this time last year and a median of $830,000, down from $880,000 in Q3 2018. Co-ops had an average price of $637,848 up from $622,021 this time last year, a median of $485,000, up from $475,500. One to three family homes had an average sales price of $1,080,728, down from $1,186,423 this time last year, and median sales price of $880,000, down from $910,000. Luxury homes (top 10 percent) averaged $2,669,402, down from $2,928,380 with a median price of $2,343,851 down from $2,500,000. One to three-family brownstones in the northwest section of the borough averaged $2,410,091, down from $2,999,601 with a median price of $2,240,000 down from $2,750,000.
Breaking stats down by area, Halstead found increases in price from this time last year in North Brooklyn for 1-3 family houses, by an average of four percent to $2,018,453. Co-ops and condos in this area saw a price increase of 13 percent to $1,258,913 which was credited to new development. Co-ops and condos in South Brooklyn saw a two percent bump in median price to $430,000. Average price was unchanged. In the same area, the average price for 1-3 family homes crossed the $1 million mark for the first time. Central Brooklyn saw declines for both housing types.
The rental market in the borough, meanwhile, paints a much rosier picture for landlords, with median rents at $3,000, up 5.3 percent from this time last year. Rental price per square foot rose 3.4 percent to $48.40. This brings the net median effective rent, which includes concessions, to $2,915, a 6.2 percent bump. The number of new leases has also gone up by 8.7 percent to 1,506, Douglas Elliman reported, with declining inventory and an unchanged amount of time listings spend on the market (26 days.) Concessions are on the decline (34.6 percent down from 43.1 percent) or the equivalent of 1.4 months of free rent.
Month over month, however, Brooklyn did see a decline across the board. Pricing for studios was down by two percent while rents for one, two and three-bedroom units decreased by one percent on average, despite rents being up overall by eight percent since September, 2018. Concessions were also more common in Brooklyn than Manhattan, most common in new developments, Citi Habitats found.
Still, Citi Habitats President Gary Malin suggests the slight drop was nothing more than the typical seasonal cycle. Once fall starts, leasing slows throughout the rest of the year and landlords are generally more amenable to concessions.
What’s different about the sales market from rentals, Malin added, is that often with sales it’s an individual seller who doesn’t necessarily follow market trends closely as a big landlord would, so it’s the bigger owners of rental apartments offering incentives like free rent and payment of broker fees. However, this is the case more when vacancy rates are higher.
“Tenants have to understand that not every owner does things the same way,” Malin said.
He also noted that even with all the ups and downs the market sees, prices don’t tend to change that drastically in New York. “It doesn’t really take any big turns,” he said. “It’s highly priced now so people are feeling pressure in terms of what they can afford.”
Overall the rental market is robust and Malin suspects it will stay that way as long as would-be buyers remain on the fence about their next moves.
“People are feeling that now is not the best time to jump in and they want to time it perfectly,” said Malin. But, he added, “That doesn’t really happen. You never really know when the market is about to bottom out and you may find that you missed out on a great opportunity because you waited too long.”