Brooklyn Real Estate Market Q4 Report
he real estate market in Brooklyn closed out 2017 on a high note and sustained the trend of an expanding market. Closed sales, however, took a break from the double-digit surge seen earlier this year, as the annual gains were less robust in Fourth Quarter 2017 relative to the first three quarters of the year. For buyers, constrained inventory at all price points was a key factor for lower growth levels this quarter as sellers were unable to keep pace with the strong demand for housing. New development product played a crucial role in spanning the shortfall of resale supply and the market responded favorably with swift sales of new product.
At 1,318 apartment closings, the total number of closed sales in Fourth Quarter 2017 rose 7% year-over-year. The new development market fared better than the resale market in Brooklyn as this was the strongest Fourth quarter for new development sales in seven years.
Inventory continued its descent through the end of the year, shrinking to fewer than 1,700 listed apartments for sale. The last time buyers had fewer options was the trough of inventory during Fourth Quarter 2013.
Market-wide median price was $725,000, up 4% year-over-year, and slight improvement from Third Quarter 2017. Average price adjusted downward 4% as there were fewer sales over $2,000,000.
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017 ended the year in a more stable condition than 2016, as three of the past four quarters registered level or annual increases in closed sales activity. Fourth Quarter 2017 closed sales were essentially unchanged from last year, and at 3,140 closings, carried the 2017 year-end total to 13,400 closed transactions. Signed contracts fell 14% year-over-year, largely in response to non-market factors like tax reform that are adding complexity to buyer decision making.
Inventory growth, consistently outpacing absorption in 2017, pushed months of supply to 5.9 months, nearly reaching the six month supply-demand equilibrium threshold. Consistent with the move towards supply-demand equilibrium, prices in recent quarters have adjusted to reflect supply and demand conditions among different price points. The 5% increase median price to $1.068M reflected the strength of the core $3M and under market, while the 7% annual decrease of average price to $1.879M supported the narrative that rising supply continues to put downward pressure on prices at the higher end of the market, where discounts and negotiability are prevalent.
Nevertheless, as closing figures suggest, the chasm between buyers’ and sellers’ expectations on pricing, value, and velocity that affected sales in 2016 has narrowed over the last twelve months. Still, market activity varied significantly by product type. In Fourth Quarter 2017, resale co-op sales rose 4% annually, for the third consecutive quarter, as purchasers sought value. Resale condos, which have been limited by lingering high prices, experienced a 3% decrease in closed sales year-over-year. New development closed sales declined too, by 12% year-over-year, a decrease that was less a reflection of demand and more about the timing of the current building cycle and completions. Listed inventory increased 9% annually, surpassing 6,000 active listings. This represented the highest fourth quarter total since 2011, and was fueled by increases in new development inventory at recently launched developments Downtown.