The profound downturn in New York home sales has left few in the industry unscathed, but the pain is most acute in certain parts of the city’s market.
The seasonal rise in listings this fall won’t get the market out of the low-supply environment that has kept prices high even as mortgage rates have surged, further discouraging sales.
On Staten Island, for example, new listings in August were down 17 percent and inventory was down 37 percent from a year before. At the same time, median price rose 3 percent and days on the market shot up 50 percent, according to the Staten Island Board of Realtors.
“These are difficult times for the real estate market,” said Sandy Krueger, CEO of the organization. “But difficult times create opportunities for those who are alert to the signals that the market offers.”
Here are three of those signals as the fall selling season gets underway.
Co-ops were having a hard time even before mortgage-rate increases doused sales, and cheaper co-ops have been hit especially hard by the higher rates, according to Keller Williams agent William Krooss-Tadas.
Buyers in recent years have been increasingly turned off by the antiquated rules and bureaucracy of co-op boards. Now, with the rise in mortgage rates, home shoppers on the lower end of the income spectrum have been priced out by co-ops’ debt-to-income and post-close liquidity requirements.
Early last year, Krooss-Tadas said, if he had a couple earning $240,000 a year, they could borrow $600,000 for a co-op priced at $750,000 and pass a board application.
“Today, we can’t,” he said.
It’s a rather stunning circumstance, as $240,000 is about three times the area median income in New York City and $750,000 is only enough for a starter home in many neighborhoods.
Krooss-Tadas said that he’s noticed monthly charges rising in many buildings because of Local Law 97, which caps greenhouse gas emissions in large buildings, and Local Law 11, which requires buildings taller than six stories to have their facades inspected every five years and repaired if necessary.
That, on top of rising rents, helps push the lower end of the sales market out of reach for many buyers and first-time buyers.
Loser: New development
Developers who have been holding out for a better economic environment before launching sales for their product may be forced by their loan terms to list this fall. And projects where units that have lingered on the market may be forced to offer price cuts.
“[Developers] have pre-payment milestones with their lenders,” said Corcoran’s Ryan Kaplan. “They can’t kick the can down the road any longer.”
While some units were priced too high to sell in the higher rate environment, other projects missed out on the hot post-lockdown markets because they were delayed by supply and labor shortages.
Kaplan pointed to the last available penthouse at One Clinton Street in Brooklyn Heights, unit 37A, which recently sold to his client for $8 million. The original asking price was $10.2 million.
“If something’s on the market for too long, it’s like the last picked piece of fruit at the supermarket: Even if there’s nothing wrong with it, you’re going to ask, ‘Why did everyone pick through the produce section and leave that behind?’” said Kaplan.
“An opportunistic buyer’s broker will be going through older product to see what people missed. It’s a great way to make an investment in the city.”
Demand in Brooklyn has stayed strong this year, a trend that Coldwell Banker Warburg agent Jeremy Kamm expects to continue in the fall.
“It’s not a secret that Brooklyn’s been outperforming Manhattan in terms of expediency,” said Kamm. “People want more bang for their buck, that means they want more space, more outdoor space.”
Brooklyn has been growing into a primary market for years, a trend which accelerated during the lockdown era of the pandemic, as buyers sought to avoid high-rise elevators, subways and crowded streets. Although transit use has mostly recovered, shift toward Kings County shows no signs of slowing down, according to UrbanDigs founder John Walkup.
“The trend for Brooklyn has just been on fire,” he said.