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Snow flurries are falling all over New York City — and so are real estate prices.
Median home prices in New York City fell at the fastest annual rate on record in January, dropping 6.2% in Manhattan and 5.4% in Brooklyn, according to a new report from StreetEasy.
Prices are on the decline, but the number of homes selling is rising, the report said. Pending sales in Brooklyn were up 17.3% in January 2021 compared to the same time last year. And, in Manhattan, year-over-year sales increased by 30.8%.
Prices are down while sales are up is because the growth in demand for New York properties is not enough to make a dent in the glut of homes still on the market, StreetEasy economist Nancy Wu told Insider.
In Brooklyn, sales inventory was up 14.1% from January 2020 levels, and up 24.7% in Manhattan.
“With inventory levels as high they are, there’s currently no end in sight when it comes to falling NYC real estate prices — good news for buyers and renters hoping to secure a good deal this year,” Wu wrote in the report.
Brooklyn is rebounding faster than Manhattan
Real estate in Brooklyn is selling at a fast clip as the borough positions itself to dethrone Manhattan as the most coveted place to live in New York City.
In the fourth quarter of 2020, Brooklyn sales jumped 82% from the previous quarter, according to the Elliman report. The 82% increase was record-setting for that three-month time period because the fourth quarter usually holds the lowest number of sales of the year, the Real Deal reported.
“We’ve seen some record-high pending sale activity in October and December of 2020,” Wu said, “and pending sales in Brooklyn are still pretty high.”
The reason for the 5.4% drop in median sales prices between January 2020 and January 2o21, Wu said, is that many homes are still lingering on the market.
“That has to do with one main factor: there’s still a lot of inventory in Brooklyn,” she added.
While Wu expects home prices to continue to fall in Brooklyn for the foreseeable future, she doesn’t see them dropping by as much as they did in January.
Brace for more home-price declines in Manhattan
For Manhattan on the other hand, Wu expects steeper drops to come. The structural change that the pandemic has brought to the labor market is likely to change the calculus for Manhattan landlords and sellers long after the pandemic.
Not only has the ability to work from home given prospective buyers the option of moving to new markets outside the city, but it has effectively put Manhattan on the same footing as Queens and Brooklyn — except those outer boroughs typically boast bigger homes at more affordable prices.
While it’s hard to pinpoint exactly how much longer both Manhattan and Brooklyn sales prices will continue to drop, Wu doesn’t see the trend stopping in 2021.
Even as the vaccine becomes more widely distributed, there is still the issue of unemployment and the state of the city’s economy, Wu explained. New Yorkers who have lost their job and may have once been able to afford homes might not be able to anymore. The homes they would otherwise buy increase inventory further, upping the number of homes that linger on the market.
“We’ll have to wait for the economy and unemployment numbers go back to normal as well in order to see prices really recover,” Wu said.
In addition, New Yorkers fleeing the city for good — people who might have bought in the city but are now buying in the suburbs, vacation home spots, or other cities — result in decreased demand for the many properties for sale.
One more factor: The sales market was already sluggish prior to the pandemic. In the third quarter of 2019, sales in Manhattan were down 14.2% compared to the same time in 2018, and the median sales price fell 8.2%, the New York Times reported.
Even as the effects of the COVID-19 shutdowns and migration patterns wear off, the underlying issues that led to those pre-pandemic drops – the glut of new luxury condos being built and flooding the market, the turnoff of the “mansion tax,” and a crackdown on using anonymous LLCs to buy in secret — will reemerge.
“There’s been a sales market slowdown in the city for the past three years. In Manhattan, and somewhat in Brooklyn, prices have been falling for a while now,” Wu said. “Even with the pandemic under control in the future, we’re still going to see prices fall as long as there’s more inventory than demand.”
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