Lower mortgage rates are pulling buyers and sellers back into the Brooklyn sales market and driving up prices, but it’s not clear how long this trend will last.
The borough saw a near-record median sales price and a record high number of cash buyers in the third quarter. Brooklyn’s median sales price of $975,000 represented a 2.6 percent annual increase and was the second highest on record, according to the Elliman Report for third quarter Brooklyn sales.
Deals involving cash buyers represented 53.2 percent of total sales in the third quarter. It was the first time cash buyers comprised more than half the market, said Jonathan Miller, president and CEO of appraisal firm Miller Samuel and author of the report.
Bidding wars were also elevated with a 23.4 percent share, the highest in two years. That means one in four buyers paid over ask, an average of 5.8 percent more.
Brooklyn boomtown
Miller pointed out that for nearly every quarter since 2016, Brooklyn has seen a record or near record median sales price.
“The borough is pushing the envelope in terms of price as Brooklyn continues to reimagine itself,” he said.
At the same time, sales fell for nine quarters in a row, mirroring the rest of New York City. In September, sales were down 4.1 percent. But compared to the previous quarter, they were up 4.6 percent.
One of the challenges for the Brooklyn sales market over the past four years is its low inventory. But inventory is rising again as sellers feel comfortable with making a move. Listings rose 13.4 percent annually in September.
Miller expects more sellers to list their properties going forward and anticipates a modest uptick in sales as a result, either in the fourth quarter or 2025, thanks to the return of buyers who were waiting in rentals for more favorable market conditions.
Sales were particularly strong for properties priced $1 million or more, rising 1.7 percent. Sales of properties priced under $1 million fell 8.5 percent.
Will the ‘Brooklyn phenomenon’ continue?
Miller pointed out that when mortgage rates drift lower as they began doing in July, they pull more buyers into the market. But a better-than-expected jobs report resulted in a spike in the average rate on the 30-year-fixed mortgage on Friday. And there are concerns the Federal Reserve may have overcorrected with its 50 basis point interest rate cut.
The question for the Brooklyn sales market is: “What happens if mortgage rates stay where they are? Will the Brooklyn phenomenon continue?” Miller asked.
A few other real estate firms weighed in on Brooklyn’s forecast, including Brown Harris Stevens, which released third quarter market reports for Brooklyn and Queens.
“The sharp decline in mortgage rates since May helped fuel an increase in signed contracts during the third quarter, wrote Bess Freedman, CEO, in her firm’s Brooklyn sales report.
“When you add falling mortgage rates to a record-breaking stock market, a growing economy, and a decent labor market, demand for Brooklyn homes should remain strong well into 2025,” Freedman said.
Brooklyn’s signed contracts were up 7 percent year over year, according to The Corcoran Group’s third quarter market report for Brooklyn. That increase was the largest annual percentage gain in three years and the third quarter out of four with growth in contracts.
That is a “strong sign that the borough’s appeal isn’t fading,” said Michael Sorrentino, senior vice president and New York general sales manager at Corcoran.
“Lower mortgage rates are encouraging buyers to jump back in, and with inventory up, they have more options than before. Overall, we’re confident that Brooklyn is poised for continued growth as we close out the year,” Sorrentino.
Growing demand for higher-end properties
Compass released Brooklyn and Queens third quarter market reports. The Brooklyn report noted a shift in buyer preferences particularly in Northwest Brooklyn, which saw a jump in signed contracts in the third quarter.
“The thriving condo market in Northwest Brooklyn reflects a growing interest in higher-end properties, while the drop in sales of lower-priced homes underscores evolving consumer priorities,” it said.
A faster Brooklyn market
One-to-three family houses saw average price per square foot increase 10.2 percent year over year, according to SERHANT’s third quarter market report for Brooklyn. Most closings for this type of property were in South Brooklyn and they were considerably less affordable compared to last year, the report said.
