Brooklyn home prices appear to stabilize since pandemic, but bidding wars increase

Crown Heights.
Photo by Susan De Vries

The last two years of record-breaking highs in the Brooklyn housing market could be coming to an end, with home prices rising more gently over the past three months, a third quarter market report shows.

The median sales price for a home in Brooklyn over the past three months was $959,000, up just 3.3 percent on last year’s median of $928,500, according to a report prepared by appraiser Jonathan Miller of Miller Samuel for Douglas Elliman. The increase is much less dramatic than in prior quarters over the past two years, including last quarter, which saw an 8.2 percent annual median price rise.

Although the pandemic-induced housing frenzy may be settling, real estate in the borough is still nowhere near pre-pandemic prices, when the median home price in Brooklyn was $790,000, according to the brokerage’s 2019 Q3 market report. And Miller said short of a recession, prices are unlikely to drop and more likely to continue to stabilize.

Chart via Douglas Elliman

The report shows one- to three-family townhouses in the borough are still in hot demand, with buyers paying a median price of $1,189,500, a large increase on 2019’s $880,000. The average price per square foot — widely considered a more true picture of value — for houses in the borough reached $750 in the third quarter, up 5.8 percent from $709 in the same period in 2021. To put that in perspective, the price per square foot was $588 in 2019.

Meanwhile, the median condo price in the borough was up 2.6 percent annually to $975,000 and the price per square foot remained the same as 2021 at $1,035, while the median price for co-ops dropped 10.7 percent from 2021 to $540,000.

Miller told Brownstoner that Brooklyn had “been flirting with records” almost every quarter since around 2015 and the pandemic frenzy saw things accelerate.

The increase in interest rates — first enacted by the Fed in March to slow inflation — set the stage for the recent reduction in transactions, which led to weaker conditions overall, he said. Overall, the average sale price in Brooklyn in Q3 was $1,223,976, up from $1,206,103 in 2021.

Prospect Lefferts Gardens.Photo by Susan De Vries

What has greatly increased this year is the competition for a reduced number of listings. Homes are staying on the market for an average of 55 days, down from 126 days this time last year, according to the report. Miller added that almost a third of closings in Brooklyn are ending in a bidding war (measured by the closing price versus the asking price at time of contract), the highest level seen since Douglas Elliman started measuring bidding wars in 2017.

The number of homes for sale in the borough dropped by almost 15 percent annually and sales in the borough were down 11.1 percent on this time last year to 3,543. However, Miller said, those sales still reflected around 1,000 more sales a quarter than the decade average. He added the reduction compared to last year was more likely related to the increase in interest and mortgage rates rather than the level of inventory.

Miller said, barring a recession or drastic change to wages or employment, he expected price trends for the end of this year and beginning of next year to continue stabilizing and for prices to see modest growth, rather than a correction or significant change.

“It feels much slower because it’s coming off a more frenzied period, but that period was the anomaly,” he said.

This story first appeared on Brownstoner.