Nearly a third of sales in Brooklyn went to bidding wars in the third quarter
- Bidding wars reached new highs in Brooklyn and Queens
- The median sales price in Brooklyn fell for the first time in two years
- Listing inventory declined in both Brooklyn and Queens
Rising mortgage rates prompted buyers and sellers to act with urgency in the third quarter in Brooklyn and Queens, pushing bidding wars to new highs. That’s according to the Elliman Report, which shows nearly one third of all closings in Brooklyn went above asking in the past quarter, the highest number in five years.
In Queens, the median sales price increased by 3.4 percent to $700,000 but fell short of reaching a new high as it has five times in the past seven quarters. Bidding wars in the borough also rose to a new record, accounting for nearly one quarter of all closings.
“Transactions are still relatively high and we are not seeing a tremendous pivot in prices,” says Jonathan Miller, president and CEO of appraisal firm Miller Samuel and the author of the report.
Are prices falling in Brooklyn and Queens?
When the list price is lower than the closing price, that’s an indication of a bidding war. In Brooklyn the market share of bidding wars in the past quarter was 30.6 percent, the highest number in five years of data collection. Miller says he would have expected bidding wars to level off “but they continue to press higher in Brooklyn.”
Likewise, bidding war market share in Queens in the third quarter increased to the third highest on record, at nearly one in five sales, suggesting just how many buyers are paying above the asking price for their apartments.
Although some of the closed sales in the third quarter may have been initiated in the second quarter, sales activity in Brooklyn was substantially higher than the long-term average. Over the past decade the number of sales in the third quarter has averaged 2,672. In the past quarter, however, there were 3,543 apartment sales—almost a thousand more than the long-term average.
The median sales price in Brooklyn declined 2.6 percent over the last quarter for the first time in two years to $959,000, but in relative terms it’s still the second-highest figure on record. For some perspective, the median sales price in Brooklyn during the third quarter of last year was $928,500.
Is it a buyer’s market?
Fewer sellers are willing to put their apartments on the market. “One of the characteristics of this market is that supply remains relatively tight,” Miller says. This is one of the factors making both Brooklyn and Queens resilient to any large price corrections in spite of rising rates.
There were 3,143 apartments listed for sale in Brooklyn during the third quarter, a decline of 14.1 percent compared to the same period last year. “Going into the pandemic, inventory in Brooklyn was already low and it continues to be so,” Miller says.
In Queens, the number of apartments on the market fell annually for the fifth straight quarter remaining below pre-pandemic levels.
The reason for the lack of inventory is market uncertainty and because many owners are tied to the low mortgage rates they locked in during the pandemic era. For these reasons they are reluctant to sell, particularly if they need to buy again with much higher mortgage rates. “That’s working to keep supply off the market,” Miller says.
As to whether it’s a buyer’s or a seller’s market, Miller says it’s not clear if either party has an advantage. Low inventory and elevated sales suggest sellers may still have the edge but a lot will depend on the type of apartment you are looking to buy or sell.
Are sales expected to slow down?
The months of supply—how many months it would take to sell all the available inventory—indicates the pace of the market and in Brooklyn in the past quarter there were 2.7 months of supply. This a slowdown compared to the record 1.8 months of supply for the previous quarter but still fairly consistent with the past several quarters. So while the spike in rates has certainly not shut down the market, Millers says “it has taken some of the steam out of it.”
Corcoran’s report for Brooklyn sales ranks the third quarter of 2022 as the second highest third quarter on record for closings with buyers being drawn to apartments at lower price points. The report notes sales under $500,000 claimed 27 percent of market share, a 7 percent increase from a year ago.
Likewise, the Brooklyn market report from Compass notes co-op trades were up in the third quarter compared both to last year and to the previous quarter. “Brooklyn still commands interest from buyers, particularly at more attainable price points,” says senior managing director, Elizabeth Ann Stribling-Kilvan. The report says a correction will continue until inflation stabilizes.
Are there deals in new development in Brooklyn and Queens?
The median sales price of a new development condo in Brooklyn in the last quarter was $857,665, a 8.7 percent decrease compared to the same quarter of 2021. In Queens, the median sales price for this type of apartment was $703,248 down 21.4 percent compared to the same period last year.
Miller says there are signs the market for new development in the outer boroughs is “slowly weakening.”
SERHANT’s third quarter market report for new development in Brooklyn notes it was the first quarter since the pandemic began that saw such a large concentration of buyers seeking out studios and one-bedrooms. Garrett Derderian, SERHANT’s director of market intelligence, says this indicates “a return to a more normal buying pattern” since the number of larger apartments that traded at the height of the pandemic was atypical.
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