In Manhattan and Brooklyn, a challenging third quarter ended on a positive note, with signed contracts jumping 167% and 157%, respectively, over Q2.
Manhattan ended Third Quarter 2020 on a positive note. Signed contracts were up 167% versus Second Quarter 2020 when the market was on “pause” due to the Covid-19 stay-at-home restrictions. Furthermore, September saw sales turn an important corner: monthly signed contracts were up versus 2019 for the first time since February. While pent-up demand from the lost spring market is certainly a factor in this uptick in sales, it does appear that demand is rebounding in Manhattan. Although supply, tax, and affordability challenges remain, we are hopeful that lower prices, record-low interest rates, and easing Covid-19 restrictions will propel the Manhattan market back to the improving levels of activity experienced at the start of 2020.
The recent upturn in contracts signed has not hit closed sales yet. Instead, closings largely reflect deals struck during the market “pause” so unsurprisingly fell from last year. For the quarter overall, closings were down 44% year-over-year and contracts signed dropped 15% given that July and August were still slower than 2019.
Covid-19 and New York’s reopening significantly affected inventory this summer as well. Active listings in Third Quarter 2020 rose 57% versus last quarter and 28% versus last year to 9,560 units, the highest number since Second Quarter 2009. As predicted, last quarter’s drop in listings was indeed a temporary result of Covid-19; after the announcement in May that reopening would begin in June, sellers rushed back into the market. New listings rose quickly, peaking at 2,200 in July—similar to the typical surge seen in April before the spring selling season.
It is important to understand that today’s actual price trends do not well align with Third Quarter 2020 pricing statistics. Year-over-year, average and median closing prices surprisingly neared or hit record highs. This quarter, several factors skewed statistics: a few very high priced closings occurred for new development contracts signed in prior years; last year’s figures were very low because of transfer tax changes on $2M+ residences that started in July 2019; plus, the effect of both was exaggerated by the limited number of sales.
As in-person showings resumed at the end of June, the Brooklyn real estate market quickly rebounded. By the middle of the quarter, the flurry of fresh new listings and a highly negotiable marketplace unlocked the pent-up demand built over the last few months, resulting in August contracts signed surpassing last year by 15%. Total inventory, 46% of which were newly listed apartments, reached 2,400, an eight-year high and 840 more listings compared to just 90 days ago.
Unsurprisingly, diminished contract activity in Second Quarter 2020 impacted closings. Just 870 apartments closed in Third Quarter 2020, the lowest in nearly eight years. Yet, closings by their nature are a look in the “rearview mirror” that reflected the springtime pause. Contracts signed—the more real-time indicator of activity—improved considerably, rising 157% versus last quarter. They still fell 11% annually, but only because in July activity lagged behind 2019.
Price statistics have yet to reveal how prices in today’s market are truly changing. Last year’s increase in transfer and mansion taxes suppressed the $2M+ market, skewing Third Quarter 2019 price figures downward. As a result, this quarter’s overall median and average annual gains, though minimal, are overstated.