According to information provided by Elliman, CBRE, NRIA and Street Easy, As Manhattan Real Estate Loses Steam, Brooklyn Gains Ground in Pandemic.
When the COVID-19 pandemic reached the United States last March, New York City was among the places hardest hit. As the epicenter for the early days of the rapidly spreading virus, New Yorkers began fleeing the city in droves, trading the crowded subways and cramped apartments of the city for the wide streets and ample floor plans of the suburbs.
According to the US Postal Service, more than 692,000 New York City residents changed their address between March and November 2020 and, per NRIA, “among those, roughly 333,000 New Yorkers fled the state.” It’s been a year since the beginning of widespread shutdowns and mass exodus of New York City, and as expected, many markets are still recovering including the real estate market. All across New York City, a surplus of real estate inventory and low demand from buyers and renters continue to drive record high price drops in both the sale and rental markets. But our analysis of CBRE and NRIA data suggests that of the boroughs, Brooklyn has shown signs that its market is more elastic than others, proving just how nuanced real estate in New York City can be. The hip neighborhoods of Brooklyn have caught the eye of not only open-air seeking New Yorkers, but real estate investors as well.
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Analyzing the NRIA, Street Easy and Realtor Data: Prices Fall in Manhattan Real Estate
If you’ve ever wanted to buy property of your own in Manhattan, now is the time. The stock market has been booming while real estate has been spotty, but investing both is recommended. When New Yorkers began moving away from the city last year, they shed their houses, apartments, condos and townhomes. New York City has seen an increase of 45% more houses listed for sale in the first few months of 2021 than the same time last year, according to Realtor.com.
This increase in inventory is driving down competition for real estate, and with it, prices. Currently, houses in Manhattan are selling for nearly 20% less than they were the same time last year, Realtor.com reports. In fact, January marked the fourth month of double-digit price declines — the fastest annual pace for price drop on record. On average, 11% of sellers cut their asking price, giving Manhattan a 6.2% year-over-year decline, according to the January 2021 StreetEasy Market Reports. The report and information provided by NRIA and Street Easy also showed that of the houses that sold in 2020, nearly three-fourths sold below their asking price.
These real estate prices are remaining low despite a surge in interest from buyers. Manhattan saw the number of pending real estate sales jump 30% from last year. In January, co-op sales were up 167%, condo sales were up 50% and townhome sales were up 100%, according to the February 2021 Elliman Report.
No Discounts for Brooklyn Buyers
As remote work became the new normal of 2020 and beyond, New Yorkers have less and less reason to visit Midtown. This has drawn an influx of interest in the real estate market in the surrounding boroughs, with Brooklyn catching the wandering eye of many homebuyers.
Brooklyn’s median sale price, $875,000, is up 9.4% and pending sales are up 17% from a year ago, according to StreetEasy Market reports. Home buyers are acting fast, too, as properties in Brooklyn are coming off the market two weeks faster than they were the same time a year ago. According to StreetEasy and NRIA, Brooklyn hit a new record number of 824 pending sales in October 2020.
The most sought-after property type of property in Brooklyn were townhouse. Despite listings being down 12%, purchases of townhouses in Brooklyn were up 480%, a demand hike more than three times that of other property types, according to the January 2021 Elliman report.
“And interest in the region doesn’t appear to be slowing,” said one NRIA spokesperson. Based on user traffic, sales and rental price, StreetEasy predicts that Brooklyn is home to eight of the 10 neighborhoods to watch in 2021.
Rental Market Follows Suit
If you’re not in the market to buy, the good news is that it’s also never been a better time to be a renter in New York City. Across all boroughs, year-over-year rent prices fell which in turn caused a boom in the rental market, attracting a flood of new leases.
Following the trend of New Yorkers escaping the densest parts of the city, price drops were steepest in Manhattan as per NRIA’s analysis. According to the Elliman report, a typical apartment in Manhattan cost you $3,000 in January, a median rent price decline of 17% from the same time last year. This marks the lowest prices the area has seen since March 2010, when the city was still recovering from the Great Recession.
The cuts in price, however, weren’t even across the neighborhoods of Manhattan. The biggest discounts were recorded in the west side, which saw an average of 20% dip in price. Declines in downtown were recorded at 17%, the east side fell 12% and northern Manhattan recorded the smallest decline with 9%, according to data from the report.
While renters are winning big by keeping more money in their pockets, residential building owners are having to offer huge concessions to fill vacancies. The Elliman report and NROA analysis of current market trends, show that on average, building owners have given an average discount of 2.3 months of free rent — a big increase compared to the average discount of 1.4 months they gave a year ago.
Still seeing a fall in price but bearing less of the brunt, Brooklyn’s median rent price was down 11.4% from a year ago. However, Brooklyn’s rental prices were already lower than Manhattan and building owners still had to increase their concessions to attract renters. Landlords in Brooklyn, according to NRIA, are offering the equivalent of 2.1 months free rent, up from the 1.6 months of free rent offered the year before, according to the Elliman Report. While both boroughs saw landlords making deeper concessions, those in Brooklyn are slightly less than what is being offered in Manhattan,
While this news may sound daunting to some, the rental markets in both Manhattan and Brooklyn are showing some small signs that the market will self-correct in 2021 according to NRIA. Lease signings in Manhattan saw a surge in January, rising 60% compared to the same month last year and marking a fourth month in a row of record-breaking increase of new tenants. A total of 6,255 new leases were signed — about 57% higher than the year prior, which saw 3,969 new leases, according to the Elliman report.
While these new numbers are positive, a quick zoom out reveals that these are relatively small improvement toward filling a deep hole dug by the pandemic. The new renters entering the market aren’t enough to fill the immense amount of rental inventory left in the pandemic’s wake — which in December 2020 was up 172% from the same time last year.
This means that vacancy rates have hit new highs. New York City recorded a 5.5% vacancy rate, which is one of the highest on record. In January 2020, the vacancy rate was 1.7%, meaning that while the recent numbers are optimistic, the rental market has a long way to go to get back to where it once was.
Size Matters in Property Discounts
With the shutdown of schools and office spaces, it’s easy to see why demand for more spacious homes are on the rise. With more people seeking extra bedrooms, the steepest decline in prices was among studios and on bedrooms. The average price for a studio apartment in Manhattan in January 2020 was $2,700, but this past January the average dropped to $2,148 — That’s a 20% discount on a studio in Manhattan. NRIA suggests that studios in Brooklyn, too, can be rented at a reduced price. Prices for a Brooklyn studio in January 2020 would cost you $2,552 a month while this past January, prices dropped to $1,940, a drop of 24%, according to the Elliman report. One-bedroom apartments, on the other hand, are seeing a slightly smaller discount of 18% in Manhattan and 15% in Brooklyn. Though less affected, even two-bedroom apartments saw a price drop of 14% in Manhattan and 10% in Brooklyn as per information provided by NRIA and Street Easy. Despite offering more space for renters, apartments with three bedrooms also saw a drop in price, seeing a 17% decline in both Manhattan and Brooklyn.
Reshaping New York Real Estate
The low-price trend for real estate in Manhattan is one that doesn’t appear to be slowing anytime soon and many experts predict the pandemic’s impact on the market will be playing out for years. This is largely due to the pandemic’s shift of the city’s economic landscape.
New York City suffered massive job losses after one third of the city’s small businesses permanently closed in July, according to Partnership for New York City. And while the area wasn’t the only place in the U.S. hit hard by shutdowns and layoffs, the New York City metropolitan area isn’t showing the same signs of recovery that have been seen around the rest of the country. The New York State Labor Department recorded that in August 2020, unemployment in New York City was at 16% — more than 7 percentage points higher than the national average unemployment rate of 8.4%.
Snowballing this is the fact that the state of New York is potentially facing $59 billion shortfall in revenue over the next two years. New York City, for example, has lost $9 billion in various tax revenue and the New York City Metropolitan Transit Authority is discussing plans to reduce services by 40%.
While economic recovery depends on a number of factors, including government intervention, experts at NRIA predict that for the foreseeable future of the New York real estate market will see an increase in current activity and Brooklyn, StreetEasy predicts, will continue to grow in demand.
That’s partly because of how companies have re-imagined their operations for a post-pandemic world. Rather than renewing leases to return to their former office space, according to NRIA, many employers have already announced plans to keep their remote workforce working from home indefinitely. Just as the pandemic shutdowns affected real estate trends in 2020, this move will continue to affect home buyers and the expanded needs for their houses moving forward. A StreetEasy survey drives this point home by showing that homebuyers’ preferences have changed as a result of the pandemic. More homebuyers were looking for extra space, outdoor space, in-unit laundry and proximity to greenspace as bigger priorities than they were before the pandemic. Brooklyn offers these features at a lower price point than Manhattan.
At the same time, we’re experiencing record-low mortgage rates that are making it easier for homebuyers and investors to take advantage of the market. StreetEasy and NRIA experts predict that low mortgage rates, attractive discounts and pent-up buyers will mean high demand for New York Real estate moving forward. This, on top of promising news of vaccine distribution which stands to resume some elements of daily life in New York City, has StreetEasy and NRIA experts predicting that 2021 will be the hottest real estate market New York City has ever seen.
Originally Appeared On: https://www.tapinto.net/towns/hackensack/articles/the-data-are-in-time-to-invest-in-the-brooklyn-rebound