Despite hitting new records, there are signs the Brooklyn and Queens sales markets are cooling
In the second quarter, the median sales price in Brooklyn reached $985,000 and nearly a quarter of sales in Queens went to bidding wars.
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Brooklyn and Queens are still seeing record prices with nearly a quarter of sales in Queens going to bidding wars, but there's a sliver of hope for buyers as the markets are also showing signs of slowing down. That’s according to the Elliman Report, which identified the median sales price in Brooklyn at a new record for the eighth time in nine quarters.
In Queens, the number of sales rose 20.3 percent compared to the same quarter last year. It’s the sixth, straight quarter increase, putting the number of sales well above pre-pandemic levels. Sales in Brooklyn in the second quarter were 45.5 percent higher than the same period in 2019, which is the last second quarter before the pandemic hit.
“Sales activity is still very robust but everything is slowing down because of mortgage rates,” says Jonathan Miller, president and CEO of appraisal firm Miller Samuel and the author of the report.
Sales slow after spike in mortgage rates
The spike in mortgage rates slowed sales growth during the second quarter. Miller says Brooklyn co-op sales in June were down 23.7 percent compared to the same month last year. Condo sales were down 32.1 percent compared to the previous year. “Even with those declines, sales are still high but sales volume is coming down to earth a bit,” he says.
Miller says he believes mortgage rates were too low for too long, which “fueled an insatiable demand that obliterated inventory.” In the second quarter, there were just 2,231 properties listed for sale in Brooklyn, down 35 percent compared to the previous year. That pushed the median sales price in the borough to $985,000, up 8.2 percent compared to the same period last year.
In Queens, the median sales price was $698,500, a 2.7 percent increase compared to the same quarter of 2021. But it is a decline of 2.8 percent compared to the first quarter of 2022, an indication that prices in the borough are cooling.
In total, 7,392 properties changed hands in Queens during the second quarter, up 18.3 percent compared to the previous year. It’s the seventh consecutive quarter of increases but the report notes increases are at a more “modest growth rate.”
“The spike in mortgages has essentially restrained sales activity,” Miller says.
The second quarter report for Brooklyn from Compass says the borough continues to be a preferred destination for buyers but points out "reduced contract activity indicates a healthy market correction is on the horizon." The report finds townhouses accounted for 43.8 percent of sales. The area with 36.3 percent of activity and the most contracts signed for the quarter was northwest Brooklyn, which includes sought-after neighborhoods like Brooklyn Heights, Cobble Hill, and Park Slope.
Luxury sales drive median prices higher
Corcoran's second quarter report for Brooklyn identified the borough’s expanding luxury market as a driver for the record median sales price, noting that for the first time in over five years, average price per square foot and median price per square foot both exceeded $1,000.
The second quarter reports for Brooklyn New Development from SERHANT draws attention to the fact that just under one third of condo sales were priced at $2 million or more, the greatest share and number on record. This is up 224 percent compared to the same quarter last year.
However, Garrett Derderian, director of market intelligence, notes "contract activity has softened as rapidly rising mortgage rates and global turmoil have cooled demand for a subset of buyers."
Waiting for the Fed's next move
Sales are traditionally slower during the summer months so what happens next depends largely on the moves by the Federal Reserve. “In many ways, the only way to see more affordability is to see a recession but that results in job losses,” Miller says.
The second quarter reports for Brooklyn from Brown Harris Stevens, points out that closed sales are always a lagging indicator of the housing market with most of the closings negotiated before the spike in rates. That said, all indicators showed an increase in prices for both co-ops and condos compared to last year.
Brown Harris Steven's second quarter report for Queens draws attention to sales in Long Island City, where the average apartment price rose 12 percent over the past year to $1,247,353. For townhouses in the borough, the average price was 6 percent higher year over year at $1,333,044.
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