We’ve been experiencing the slow but steady spring market we predicted in our previous newsletter.
Inventory has been low and tightening across the board in recent months, from studios to townhomes. Supply in Brooklyn is down 9.8% from this time last year. Many buyers who hit pause when rates doubled have acclimated to the current albeit volatile rate environment and are on the hunt again; pending sales are up 12.8% from last month. We are nowhere near the frothiness of the buying frenzy in 2021, but prices in Brooklyn overall remain steady with about a third of listings still seeing bidding wars.
Despite the Federal Reserve’s tenth increase of the key interest rate over the past 14 months to its highest level in 16 years, by 0.25 percentage points, benchmark mortgage rates have ticked down on the heels of recent bank failures and are now in the 5s/6s. The Fed’s commentary at their recent meeting suggests they feel rate increases have been effective at bringing down inflation and will likely yield 3.3% by the end of 2023, though this remains above their 2% target.
Per Fed Chair Jerome Powell, “There’s a sense that we’re much closer to the end of this than to the beginning. If you add up all the tightening that’s going on through various channels, we feel like we’re getting close or maybe even there, but again that is going to be an ongoing assessment.” Powell also indicated that the Fed remains hopeful about avoiding a recession. Interest rates and mortgage rates aren’t likely to stabilize until 2024.
Brooklyn is an increasingly popular place to live, and though desirable neighborhoods are somewhat insulated from extreme shifts much of the rest of the country is experiencing, we’re not totally immune to overall market dynamics.
One reason for the lack of inventory today is that homeowners who refinanced or bought within the last few years at an extremely low rate would face significantly higher rates now, making trading up less feasible because prices have remained steady given lack of inventory – creating a bit of a self-perpetuating cycle in this supply-constrained market.
The key to a successful sale today is to price property appropriately from the start to draw in as many buyers as possible as quickly as possible.
Adaptability and flexibility are critical. If buyers don’t respond favorably within the first few weeks a listing hits the market, it’s important to adjust. Listings that sit on the market for a month or more tend to be perceived as stale. Buyers are generally able to secure discounts in their favor the longer a listing languishes on the market. For a stagnant listing, we recommend home staging and fresh, expert marketing to boost your listing’s profile and garner new attention.
Although there may still be competition, it is far less than in a strong seller’s market where cash is king and zero concessions or even standard contingencies are entertained. Buyers tend to have slightly more leverage today, particularly for any listings that have lingered on the market.
A smart, nimble broker can help buyers identify relative values and properly advise you how best to leverage your buying power and negotiate to your advantage.
Opportunity exists in any market. Even if rates are higher than the wildly low rates during the height of the pandemic, they’re still relatively low (5s/6s, on average) and buyers can always refinance when rates dip again.
As always, hiring an experienced broker who can offer hyper-local real-time data can be hugely beneficial to both sellers and buyers.