Q1 Market Insight

As I look at the updated data from Q1, there are two takeaways:

1. Lack of Inventory: The real estate market is experiencing mounting price pressure across all segments, primarily due to a scarcity of inventory. In Manhattan and Brooklyn, interest rates are disrupting occupant movement, affecting both rentals and sales. The number of leases signed and closings has significantly dropped from the highs of 2021.

   There are signs that we’ve adjusted to this new normal in 2024; closings are up in Q1. Will this hit the rental market in time for relief before the busy summer season? It seems unlikely at this rate

2. Tale of Two Cities: Manhattan and Brooklyn increasingly become different environments on the sales front. Manhattan is a buyer's market where deals can be had; Brooklyn is a seller's market with competitive bidding for in-demand products.

In the rental market, both Manhattan and Brooklyn saw leases signed in March that were around 40% lower than March 2021. This lack of inventory in the market is leading to increasing demand.

In Manhattan, you have nearly 4,000 apartments that could be hitting the free market, which are not. These challenges are only fueling an ever increasing tight market.

The topline number about rent increases are surprising no one. What really stands out to me in this report, though, is this 3-bedroom price increase, especially in Brooklyn- 25% is rough.

More workers are back in the office, but anecdotally many of those still work from home at least one day a week. This means that office setup is still a common request in the search for larger homes.

Prices in Manhattan are still, on average, higher in Manhattan across all categories. While three-bedroom price increases haven’t been as dramatic, the price points are far higher than in Brooklyn.

Let’s look at inventory in Brooklyn as we transition into my Tale of the Two Cities. A direct quote from the Brooklyn Q1 Report: “Active Listings were 46% below their Q1 2021 high of 2,612 apartments.”

This lack of inventory is leading to incredible price pressure in Brooklyn. I’ve been to open houses with buyers with 30 groups in one Open House. Lines can be around the block for apartments that are priced well.

In Prospect Heights, where I live, this same demand for larger apartments is driving pressure for 3 bedrooms to an incredible degree.

(Sidenote: I hate these neighborhood groupings but didn’t have time this week to do a custom analysis.)

Manhattan inventory is down relative to its recent peak (Q4 2020) but nowhere near the level of Brooklyn. This level of inventory but weaker demand is leading to a softening of prices.

Negotiability is the highest in years in Manhattan, and prices are near 2014-2016 levels.

Note: Manhattan prices are not down 12%. This is a reflection of the type of product sold. New development sales are down 17%