The 2023 market is already showing signs of promise after a sluggish second half of 2022. Many are speculating that the worst is behind us in light of the following national metrics: 1. There was a 25% increase in weekly mortgage applications three weeks ago, and an additional 7% increase last week. 2. Mortgage rates are at a 4-month low and are expected to hold steady or decrease. 3. There’s an increase in buyer interest, open house traffic, and offers. 4. Pending closings were down 30+% at points in the Fall, but over the last few weeks pending listings in most major markets are flat year-over-year. 5. Home builder sentiment improved for the first time in a year. These trends largely track in NYC. Top NYC mortgage officers we have spoken to have seen a dramatic uptick in prospective buyers seeking or renewing their pre-approval letters since early- to mid-January. Rates are now at a 4-month low (about one percent or 100 basis points below October levels) and lenders believe this is only the beginning of improving rates. This sentiment was further buoyed by Wednesday's announcement by the Fed of a modest 1/4 point rate increase with a "couple more" expected in coming months. The stock market and 10-year Treasury rate responded positively, and some banks cut their rates almost immediately (for example, Citibank by 1/8 percent). The jobs report added a bit of a wrinkle, coming in much stronger than expected with over half a million new jobs added to the economy. Generally, concerns over rising unemployment serve as the main brakes on the Fed raising rates to control inflation, so this seemingly leaves the Fed open to more rate hikes. But at this point the lending industry seems to be focused on what the report said about wage growth, which remained stable, supporting the Fed’s interpretation that the US has entered a period of disinflation. While it is impossible to say for sure what the Fed will or will not do, there is some confidence that inflation was transitory and has gotten under control, easing the pressure on the Fed to raise rates, which likely means stable to decreasing rates over time. Since the start of the new year, NYC has also seen a notable uptick in buyer activity. In addition to increased mortgage applications, open house attendance is up markedly. Compass agent open house surveys throughout November and December showed Manhattan open houses receiving 1.09-1.51 buyers on average, with more than 35% getting zero visitors. Since the start of the new year average weekly attendance has ticked up to 2.24-2.46 visitors, and the percent of open houses with zero visitors has dropped below 15% for the last three weekends. Brown Harris Stevens' open house survey reports similar results with average Manhattan visitors at 2.03-2.53 visitors weekly on average since January 18 versus 0.96-1.21 in October and November. Pending sales -- or "in contract" listings in NYC parlance -- have not recovered in NYC to the same extent as in other markets, on paper. In Manhattan, versus many other markets, it takes on 7-20 days from the time an offer is accepted for a contract to be signed. Due diligence often takes up the lion's share of this time, and is not a factor in many other markets. Given this lengthy time to contract, we wouldn't expect January activity to be fully reflected in January contract figures but would expect a bump in February. Closed sale prices were down in January reflecting market volatility caused by lower transaction volume. As we noted in our Fall newsletters, inventory was way down in the Fall as many sellers opted to wait out what was viewed as a blip in the market. While special properties traded at or above what they would have in a strong market, other properties did not fare as well bringing down overall metrics. However, it is important to note that we are talking about a small number of "deals" on these properties, versus historical prior downturns where supply remained high causing widespread contraction in prices. Continuing a trend we saw throughout the end of 2022, Manhattan new inventory remained below historical averages in January, as some sellers still seemed wary to enter the market, though this might change as January trends become publicized. Based on rates, inventory levels, open house traffic, and our experience on the ground, we anticipate February to reflect more clearly the positive trends in the market. As we’ve come to expect, Brooklyn was overall less affected by rising rates in the Fall, and since the start of the new year has seen an even faster uptick in activity than Manhattan. In addition to significantly higher open house traffic - 4+ visitors on average based on all Compass agent open house surveys since the start of the year - January contract activity, while nowhere near the manic levels we saw in January 2021 and 2022, were slightly higher than in January 2020, indicating Brooklyn market activity is still in line with pre-pandemic norms. Inventory in Brooklyn remains constrained, especially in certain areas, with ~31% fewer new listings entering the market this January than last. January closed sale price metrics in Brooklyn all saw year-over-year increases, unlike in Manhattan, indicating that while fewer deals were done in the final quarter of 2022, prices in Brooklyn have not softened. As rates continue to improve we expect buyer demand to increase, with fast paced absorption and multiple offers on certain property types remaining hallmarks of the Brooklyn market in 2023. The Fed unanimously approved a quarter-point interest rate hike on Wednesday, slowing the pace of its increases in a clear sign that the central bank is seeing progress in its battle with inflation. The decision comes after months of jumbo-sized rate increases intended to cool the economy, and marks the return to a more traditional interest-rate policy. (CNN) Gov. Kathy Hochul proposed extending the 2022 construction deadline for New York City projects grandfathered under the now-expired 421a program, giving developers until 2030 to finish their projects and still receive the lucrative tax break. (REAL DEAL) "Days on market" -- the number of days, weeks, months, or even years a listing has been for sale -- is not a straightforward metric and its effect on pricing and negotiations is more nuanced than one might think. (BRICK_UNDERGROUND) With mortgage rates at their lowest point since September, mortgage application volume jumped nearly 28% compared the week of January 18. (CNBC)

After a very slow Summer when prospective buyers were seemingly "gone fishing" for anything but apartments, a looming question is what to expect this Fall and beyond. Based on current data and analyses by real estate experts, and what we are seeing on the ground, we anticipate low transaction volume through the end of the year and into early 2023, but we don't expect prices to drop off a cliff. As we are already seeing from September's figures (with new listings down 12% year-over-year), sellers who don't have to sell immediately will likely wait out the current interest rate environment which is expected to stabilize and improve next year after peaking in early 2023. Particularly with the robust rental market, many sellers will hold if they can rather than settle for lower prices, especially given that recovery of buyer demand (tied to interest rates) is on the horizon. Lower inventory should exert upward pressure on prices even in the face of lower demand, keeping prices relatively steady after the modest correction we've already seen. Data from September support this: even with contract activity down dramatically (-33.7% year-over-year), prices largely held steady with median sale prices and price per square foot essentially the same month-over-month and even up slightly year-over-year. Of course, not all sellers are able to hold their properties, so buyers can take advantage of discounts and negotiability, particularly on some products. And some buyers will shrug off currently high mortgage rates on the belief that they will be able to refinance at a lower rate relatively soon. Anecdotally, we are seeing more cash buyers than usual, even on entry-level coops which historically sell with financing. While the buyer pool is markedly smaller than a year ago, we have seen an uptick in activity across our listings since Labor Day, in terms of both appointment requests and offers received, with some listings even receiving multiple offers. So, at least some buyers are back from the Summer slump. Assuming no unexpected shifts in macroeconomic trends or October's market data, the sky is far from falling, though it might be a slower 6-12 months for us agents in Manhattan. The Manhattan rental market, which was fodder for many news stories over the Summer (e.g. "July Scorcher: Manhattan Rents Hit $5000 For the First Time"), cooled slightly, but rental inventory remains tight and prices are still well above pre-pandemic averages. All these forces are interrelated, and as rents normalize and even go down, that should rein in inflation, which in turn feeds into Fed policy on interest rates, and so it goes. In Brooklyn, inventory shrunk further with both new listings and total supply down by double digit percentages year-over-year in September. This kept days on market and median price metrics even with last year despite substantial drops in contract and sales activity. Continuing the trend from previous months, Brooklyn metrics varied dramatically based on area and property type. As we’ve come to expect, NW Brooklyn – which includes high demand areas like Cobble Hill, Carroll Gardens, Fort Greene and Park Slope – had a far higher share of total signed contracts (29%) than inventory (23%), whereas South Brooklyn accounted for 52% of total listings but only 48% of contracts. Rising residential rents drove last month's inflation figures with the surging cost of shelter accounting for about 40% of last month’s cost of living increase. (THE REAL DEAL) According to a recent report, homes most vulnerable to price declines in a potential economic downturn are found in the suburbs of New York City (most in NJ), Chicago metropolitan area, and throughout California. (BLOOMBERG) September homebuying activity in NYC and its suburbs were down 20 - 30% across the board last month compared to a year ago but still above normal levels. (THE REAL DEAL) The real-estate sector is still adjusting to rising mortgage rates, recession fears, and a strong job market, which in NYC has led to highly unpredictable results; one property might sell in three days with three offers, while a similar one a block away can remain on the market for three months without a bid. (MARKETWATCH) The U.N. calls on the Fed and other Central Banks to halt interest-rate increases, warning that further policy tightening risks pushing the global economy into recession followed by prolonged stagnation. (WALL STREET JOURNAL)

The second quarter was truly the tale of two markets. On the one hand, both prices and sales volume were up-up-up. While the data mostly appeared positive, the prevailing sentiment was that the market had seemingly slowed to a halt. The disconnect stems from the nature of the data -- prices and sales volume data reflect closed deals that had been negotiated months earlier, when inventory was relatively scarce and demand was high. And while it's no secret that stock portfolios have been decimated by macroeconomic factors the last year, real estate had been holding up comparatively well -- folks were still getting good interest rates on jumbo loans and they were committed to buying... until they weren't. After a small dip in April, the market had clearly cooled off by late May. The interest rate hikes finally caught up with buyers, and a hesitancy to liquidate stocks coupled with the belief that the market had become "too hot" made many buyers take the summer off. But perhaps the biggest factor, and what almost always chills our market, is uncertainty. As noise of an imminent recession grew louder and economic indicators (inflation, stock market, etc.) continued on a downward trajectory, many buyers adopted a "wait-and-see" approach which seems to be dominating the summer market. The inventory crunch is over, yet signed contracts are down double-digit percentages. In Manhattan, the market shift is now obvious: year-over-year, there were 5.7% more listings but 24.6% fewer signed contracts. Looking closer at a month-by-month basis, the shift becomes more clear. Both the higher and lower end of the market (above and below $3.5M, respectively) saw a dip in April which recovered a bit in May, with greater recovery in the higher-end of the market. However, in June, often the busiest time in the market, there was a significant drop in signed contracts in both segments. The story in Brooklyn is less dramatic but trending similarly. The number of closed sales increased 1% year-over-year despite severe inventory shortages, and Q2 closed sale prices hit the highest values on record ($975K median, $1.261M average, and $905 average price per square foot) - while discounts sank to the lowest level since 2017 (just 3% on average). Again, these figures mostly reflect deals that were negotiated two or more months before closing. Signed contracts were down 21.1% year-over-year, indicating that the record growth trends of the recent past may be slowing. There continues to be an inventory crunch for townhouses as their share of the market hit an all-time low pushing the average sale price of townhouses up 16.9% year-over-year, surpassing an average of $1.5M for the first time. Condo sales also saw striking price increases, with average sale prices up 14.9% year-over-year. Only coops saw essentially no growth in prices, coming in with a median price $515K, down from $520K in Q2 of last year, and average price $692K, down from $725K this time last year. Geographically, Northwest Brooklyn, which encompasses highly sought-after neighborhoods like Brooklyn Heights, Cobble Hill, and Park Slope, had the most contracts signed for the quarter, representing 36.3% of all signed contracts borough-wide but only 20% of total inventory, meaning that the lag in activity in other areas is even more stark than the overall picture would suggest. This is especially true for East Brooklyn (which includes Bed-Stuy, Crown Heights, and Prospect Lefferts) and South Brooklyn, which saw no increase in contracts but a marked increase in inventory. While this decline represents a significant departure from the hyperactivity in the Brooklyn market in 2021, dramatic decreases in prices are improbable, given that inventory remains tight, especially in the most in-demand areas and for certain product types (i.e. townhouses). While it's becoming clear that many buyers have adopted a “wait-and-see” attitude, the shifts in both Manhattan and Brooklyn present a unique opportunity for those willing to make a move in coming months. Sellers have already begun adjusting pricing downward, especially in Manhattan, and anecdotally we know that negotiability is rising. Especially for buyers sitting on proceeds from a recent lucrative sale or otherwise looking to invest their cash, this summer could prove to be a "dip" to capitalize on. We were honored to be included in the year's Real Trends America's Best Real Estate Professionals List - Ranked #174 By Volume for a Small Team (2-5 Agents) in NYC. The average monthly rent in Manhattan reached $5,000 for the first time ever last month. The jump is partly a product of some would-be buyers re-committing to renting in the face of increasing mortgage rates. (CURBED) New York City’s post-lockdown real estate bonanza is over. Contract signings were down last month in NYC and surrounding areas. (THE REAL DEAL) Despite hitting new records in Q2, there are signs the Brooklyn and Queens sales markets are starting to cool. (BRICK UNDERGROUND) Sales contracts for Manhattan apartments plunged by nearly a third in June as the city’s scorching real estate market started to cool. While prices haven’t started falling yet — at least not broadly -- buyer attendance at open houses and multiple bids have all but evaporated. (CNBC) Mayor Eric Adams and the New York City Council enacted the Fiscal Year 2023 (FY23) NYC budget. Budget items critical to the real estate industry, as outlined by the Real Estate Board of NY (REBNY) include: New Property Tax Rates: Property taxes are ultimately a function of both the billable assessed value and tax rates. In the new budget (effective July 1, 2022 for FY23), billable assessed values increased across all classes, with Citywide taxable assessments up +7.05% overall. In terms of rates, Tax Class 2 Buildings (4+ Unit Apartment Buildings, including Condos/Coops) had its first increase in six years. When you combine changes in taxable assessments and tax rates, Tax Class 2 units will see an average increase of +7.28%, while Tax Class 4 will see an average +6.88% increase vs. last year. Public Safety: Additional funding for the NYPD; Funding for the Subway Safety Plan; Expansion of the Precision Employment Initiative to connect individuals at risk of participating in gun violence with jobs Clean Streets and Sanitation: Funding to support increased citywide litter basket pickup; Restored Sanitation Funding Homelessness Prevention and Affordable Housing Access: Capital funding for affordable housing programs, including HPD and NYCHA; Funding for City FHEPS vouchers; Funding for Drop-in Centers, Safe Haven Beds, and Stabilization Beds; Funding to increase mental health support and outreach for unhoused individuals Other REBNY Priorities: Additional funding for the urban forest, tree maintenance and tree plantings; Funding to enhance the Office of Building Energy and Emissions (Local Law 97 implementation); Funding to assist with expediting FDNY inspection processes

July was a slow month in Manhattan though things seemed to perk up slightly toward the end of the month as interest rates stabilized and even came down and the stock market rallied. The current activity levels seem to have slipped into the usual seasonal market slowdown this time of year and seem to be more indicative of pre-2020 levels. While 2021 was a gangbuster year for the Manhattan market, looking back at 2019 as a comparison point provides context: Total contracts signed in July 2022 and 2019 are comparable - 774 Manhattan contracts were signed in 2019 versus 824 this year, and the luxury market is significantly stronger with luxury contract volume 50% higher in 2022 than 2019 (and only down -15% versus 2021). Overall contracts and inventory rates were fairly well-matched throughout the city, although as per usual Downtown Manhattan contracts (28%) slightly exceeded inventory (24%), while Midtown East listings made up 19% of inventory but only 16% of contracts signed. While median sale prices remained relatively stable, we would not expect to see the effects of the Summer slowdown until more of those sales actually close in the coming months. In Brooklyn, average and median sale prices tracked another month of increases, although PPSF figures were buoyed by notably strong PPSF figures in the townhouse market (+15.6% vs. July of last year). Anecdotally, we are still seeing bidding wars and incredibly low inventory levels with all our townhouse buyers, and inventory levels in the most in-demand areas for all product types has remained quite low. So while marketwide contract activity in BK shows a dramatic decline compared to July of last year, looking closer at the geographic distribution shows that there is a big disparity among regions. North-West Brooklyn - which includes high-demand neighborhoods like Carroll Gardens, Cobble Hill, Boerum Hill, Park Slope, Prospect Heights & Fort Greene - represented just 22% of inventory but 35% of signed contracts; conversely, South and East Brooklyn made up a combined total of 67% of inventory, but only 55% of contracts. While it remains to be seem how the fall market will play out, as long as interest rates and the stock market stabilize, especially in Manhattan, we might be looking at a return to pre-Covid normalcy and seasonality. There should be a bump in inventory mid September through October, and inventory leftover from the Summer will likely resort to price reductions. Mortgage rates fell this week as concerns about a recession outweighed worries about inflation. (WASHINGTON POST) The Manhattan sales market has slowed down. While it may seem dramatic, the data suggests the market is not crashing, but simply returning to normal, seasonal volume. In other words, the slowdown appears to be more of an issue of comparison, and less of a macroeconomic shift. It’s not a crash, it’s a reversion to the mean. (FORBES) Nearly 2 million square feet of office space was leased in Midtown in July, a three-fold jump from July 2021 and more than in any month since December 2018. (THE REAL DEAL) The economic policy bill will likely maintain SALT deduction caps and end the tax break on carried interest deductions which benefits private equity and hedge fund managers. (BLOOMBERG)

A gradual chill continued in the Manhattan market last month, with inventory rising while macroeconomic factors – rising interest rates, inflation, decline in the stock market, and recession fears – put downward pressure on demand. Anecdotally, the decline in the stock market has been the overwhelming reason for buyers exiting the market. Not only have buyers seen their net worths shrink (making some less qualified for purchases), but the prospect of selling in a bear market has deterred them from liquidating holdings and in some cases, affected expected parental gifts for the same reason. We have not perceived rising interest rates to be nearly as big of a factor as almost all of our buyers have been securing rates from 3.5-4.5% (higher than a year ago but not prohibitive) on their recent loans, and not the 5%+ rates that have made headlines. In May, active inventory saw its first notable uptick (up 4.8% vs. April and 0.4% year-over-year), while signed contracts were down both month-over-month (-9%) and year-over-year (-22.6%). This pushed overall prices down slightly versus last month, although still up year-over-year. Looking closer at these market-wide figures, there was a big difference between coops and condos. Coops saw a 3.9% uptick in inventory yet a substantial -18.5% drop in contracts. On the other hand, both condo inventory and signed contracts were up versus last month (though contracts were down 16.5% from the condo-spree of Spring 2021). As we’ve come to expect, the Brooklyn market has been resilient to external factors, with all price metrics (median and average sale prices and average PPSF) again up from April and year-over-year. However, a slight uptick in inventory has curbed the ferocity of bidding wars on some less-special properties. Market-wide, average days on market increased (+7.2% vs. April) and contract activity declined (-9.9% vs. April and -20.6% vs. last May). Nonetheless, rare properties – e.g. 2+ beds with outdoor space in popular neighborhoods or townhomes – are still moving quickly and receiving multiple offers, especially those priced attractively or in especially high-demand / low inventory areas. In contrast to Manhattan, Brooklyn coops outperformed condos last month, with larger increases in price metrics and a smaller decline in both days on market and signed contracts. This can perhaps be attributed to a continued discrepancy in inventory: condo inventory was up 10% vs. April (+2.8% year-over-year) while coop inventory was only up 3% vs. April, and was actually down -8.3% year-over-year. Real Estate News Nationally, luxury home sales fell almost 18 percent February-April, quite a turnaround from a year ago when these sales were up a whopping 80%. Notably, among the top 50 metros analyzed, Long Island’s Nassau County saw the biggest drop in luxury home sales, down 45.3 percent, but neighboring New York City was the only metro with a rise in luxury sales, up 30 percent. (REAL DEAL NATIONAL) In less than 10 years, Compass has become the #1 real estate brokerage in America (RealTrends 500) and one of the youngest companies ever to make the Fortune 500. N.Y.C. Companies Are Opening Offices Where Their Workers Live: Brooklyn. (NY TIMES) The frenzied pace of the NYC sales market is calming down, a result of more listings on the market and slowing demand. With less competition, buyers have gained some breathing room—they can take a day or two to make an offer—something not possible in recent months. (BRICK UNDERGROUND) Corporate executives in May bought shares in their companies at a rate not seen since the early days of the Covid-19 pandemic in what some Wall Street analysts said was an encouraging sign for the US stock market. (FINANCIAL TIMES) Legislative Updates Below are some important updates on what happened – or rather, did not happen – as the NYS Legislature wrapped its session last week. Thank you to Joshua Kopelowitz, Partner and Co-Chair of the Real Estate Litigation practice of Fox Rothschild, for alerting us to these developments. The NYS legislature broke without passing the Good Cause Eviction Bill, which means it won't pass this calendar year, but it remains an important issue for residential landlords to watch. The proposed bill would have essentially barred landlords from ending a tenancy except for certain lease violations and imposed universal rent control by limiting rent increases on all apartments. More details on the bill here. The NYS legislature also did not extend, renew, or replace the Affordable New York Housing Program known more commonly as 421-a, which gave developers a multi-year property tax exemption for setting aside 20 percent of their units as rent-stabilized. Note, properties already participating in the 421-a program are not affected, only developments that are not part of the program by the June 15, 2022 deadline. Commercial Observer While the moratoriums are still expired and most NYC Real Estate attorneys do not think they are coming back, there are still protections for tenants (e.g., New York’s Tenant Safe Harbor Act, Emergency Rental Assistance Program (ERAP), etc.). See more detailed guidance from the AG office here.

The fall market is officially underway in New York City – since Labor Day, there have been 766 new listings in Manhattan (just over last year’s 714) and 591 new listings in Brooklyn (compared to 477 in 2019). Total inventory in both boroughs is up substantially versus this time last year (39% in Manhattan and 40% in Brooklyn), but lagging demand in Manhattan has led to a surplus while Brooklyn has proven resilient since the market re-opened in June with signed contracts up this August versus 2019 (958 contracts signed last month, 18 more than the same period last year). In Manhattan, we've observed a growing divide between the listing “haves” and “have nots.” In this case, the “haves” are properties that offer something special (whether that's location, low monthlies, outdoor space, an amazing layout....), while the “have nots” are everything else. Despite a dramatic increase in active inventory, fewer buyers are searching in Manhattan (in the last 30 days, 595 listings have entered contract in Manhattan compared to 750 in 2019), and much of the active inventory is stagnant and has been slowly accumulating thanks to large influxes in June/early July as well as this last week. The "haves" are getting snatched up, but they make up a small percentage of the market. Of the 6,358 new listings that came on the market over the summer, 319 entered contract within 30 days. For properties that were negotiated (entered contract) post-COVID and have already closed, the median days on market was 54 and closed sale prices were 4.5% below last asking prices. More broadly, active listings in Manhattan have been on the market for a median of 81 days, indicating that about half all active inventory has entered the market since Phase 2 began 82 days ago, and the days on market for properties with 83+ days on market is actually much higher than it appears as days on market counting was suspended between March 20th and the start of phase 2 of June 22nd. Currently more than 35% of active listings in Manhattan show 100+ days on market, which translates to 191+ days, or 6+ months that these properties have been on the market. Since Labor Day, some 455 Manhattan listings have reduced their price by a median 4.6%. Even so, there does not appear to be a magic bullet price that can ensure a swift sale for many of these properties. Midtown Manhattan has been hardest hit across almost all metrics, with the fewest number of closings, longest time on market, and highest negotiability from initial asking (~7.0%). The Upper West and Upper East Side markets were not far behind in terms of negotiability, closing at a median 4.5% below last asking and 6.9% below initial listed price, with a median 52 days on market. Downtown listings saw less time on market – a median of 49 days – but closing prices were still a median 6.4% below initial list prices. Interestingly, closing prices were ~6% below BOTH last asking and initial listed price Downtown, indicating that Downtown listings saw fewer price reductions while on market. It is not all doom and gloom in Manhattan, and it is possible the tides have started to turn already with the new season. Prices have not fallen catastrophically, even through the worst of this. As schools, offices, and restaurants re-open, buyers will return, and the market is expected to recover. In the meantime, "sellers need to listen, and buyers need to strike." Brooklyn market metrics have been significantly stronger borough-wide. Of the 461 recorded closings in the last 30 days, 233 represented deals negotiated and entered contract post-COVID. These listings were on the market for a median of 44 days, and closed just 1.8% below last asking; 2.9% below initial listing prices. Brooklyn has seen fewer and smaller price reductions than Manhattan as well, with 329 price reductions since Labor Day with a median decrease of 3.9%. Looking more closely at some of the major Brooklyn sub-markets, homes in neighborhoods like Park Slope, Prospect Heights, and BoCoCa (Boerum Hill, Cobble Hill and Carroll Gardens) closed with essentially zero negotiability, and the shortest amount of time on the market. The highest level of negotiability in the borough (and longest time on market) was found in the traditionally highest priced neighborhoods -- Brooklyn Heights, DUMBO, and Fort Greene (which also traditionally have the highest monthlies in the borough), as well as in South Brooklyn, which saw a wave of very low-priced single/multi-family home sales, possibly due to distressed sellers or landlords unable to ride out the current rental market slump. UPDATE: A survey of 66 signed contracts since August 31 submitted by Compass agents is consistent with our analysis above. Here are the results: Manhattan Negotiability Rate off LIST Price: Average: -5% Median: -4% Negotiability Rate off ORIGINAL LIST Price: Average: -9% Median: -6% Days on Market: Average: 114 Median: 59 Brooklyn Negotiability Rate off LIST Price: Average: -2% Median: -2% Negotiability Rate off ORIGINAL LIST Price: Average: -3% Median: -3% Days on Market: Average: 64 Median: 47

As anticipated, new listings surged in July with pent-up supply intended for Spring finally coming on the market once NYC entered Phase 2. Buyer activity has resumed and has varied dramatically depending on location and price point, with Brooklyn outperforming Manhattan across all price points. Listing prices continue to largely hold at pre-COVID levels in both boroughs, although we are starting to see some price reductions now, and we expect adjustments after Labor Day for listings that have not entered contract by the end of August. In Manhattan, new listings were up 72% in July compared to last year; however, year-to-date new listings are still lower than historic levels. While supply is down, demand has lagged further with the number of contracts signed this July 40% lower than last year. Even contract activity for homes priced below $1M, almost half of all contracts signed in Manhattan last month, was 37% lower this year than last. July contract activity in the $1-2M market lagged further, with 45% fewer contracts signed compared to 2019, even though there were 87% more homes in this price category listed this July versus last. On the higher-end ($2M+), signed contracts were down 40% this July compared to last, but inventory in this market was dramatically lower this year. One reason for this might be that sellers are holding back on listing new properties over the Summer on the belief that luxury buyers are firmly ensconced outside the city at this time. There is no clear data on where contracts are currently being signed relative to asking price, but this information should begin trickling in via closings taking place over the next few months. What we have seen so far suggests that accepted offers in Manhattan are generally within 10% of asking price, but there are outliers especially in the higher-end of the market where negotiability has been much greater. A Compass survey of median negotiability (the negotiated price compared to asking price) for the first half of July suggests that negotiated prices were within 7% of asking on average, while rejected/unsuccessful offers were more than 10% below asking. A more recent Compass survey of contracts signed between June 22 – August 3 also indicates that an overwhelming majority of contract activity (84% of contract signed) were for homes priced below $2M which entered contract within 3.8% of the last asking price. There is very little data for homes over $2M, and these data points range from at-ask to 16% below. As for closings, unsurprisingly, there were half as many closings this July in Manhattan compared to last. Closed sale prices reported thus far are essentially unchanged from last year, and in both years, sale prices were on average 11% below asking, suggesting that buyers expecting negotiability in Manhattan is nothing new. Accurate and competitive pricing remains key as supply is expected to continue to outpace demand, especially considering the higher-priced properties that are poised to enter the market in the Fall. While listing prices have held at pre-COVID levels thus far, there may be an adjustment in the Fall when new listings come on and closing data becomes available. By contrast, Brooklyn’s market has seen a more robust rebound. New listings last month were up 43% versus July 2019, with listing prices virtually unchanged from pre-COVID levels. The most recent Compass negotiability survey reports almost two times as many offers made in Brooklyn than in Manhattan during the first half of July, with bidding wars reported on well-positioned properties. From a survey of offers that were successfully negotiated or accepted July 1-15, negotiated offers were largely within 1-3.9% of asking prices; on a more recent Compass survey of contracts signed between June 22 - August 3, negotiability was virtually nonexistent with Brooklyn homes entering contract on average at less than 1% below asking with more than 60% of contracts reported to be at or above asking. There were less than half the number of closings in Brooklyn this July versus last, and the median sale price was down 4%. As closings are a lagging indicator, the latest closed sale figures are starting to reflect contract activity (or re-negotiations) that took place during the shutdown, at the peak of the pandemic. While there has been much talk of an exodus out of NYC for (literally) greener pastures, it is not the case, in my opinion, that COVID is driving New Yorkers out in droves. Anecdotally, all of my pre-COVID buyers are either actively looking in NYC again or they plan to resume their searches in the Fall. That said, surrounding markets have been booming, but much of that demand can be attributed to second-home buyers and folks who simply accelerated their longer-term plans to move out of the city. For some, COVID has made “just a plane flight away” from their families seem too far and it has pushed those to relocate which may bring many New Yorkers back to the city. There are many factors at play in what is going on in the market now and it will continue to be unpredictable for the near future, but I hope this report provides some assurance that despite everything, the market continues to be resilient. See below for Compass listings that have come on the market since Phase 2 and already are in contract. Properties that offer something of value or a unique look that are priced right still go fast in this market.

Overall Market Activity Since Phase 2 Since NYC entered Phase 2 of the NYS reopening plan on June 22, the market has returned with a tidal wave of new listings – 1,820 in Manhattan and 1,553 in Brooklyn – more than double the number of listings that entered the market across both boroughs during the same period last year. Despite many doom and gloom predictions, buyer activity has increased as well, most notably in Brooklyn, which has seen 450+ listings enter contract since the start of Phase 2, bringing contract activity in the borough within 13% of 2019 figures for the same time period. As expected, however, inventory and activity has varied widely by product type, and on the higher end of the market we've seen increased negotiability and competitive pricing as sellers vie for buyer interest in a suddenly saturated market. Today's report details the latest developments in the Manhattan and Brooklyn townhouse markets. Please do not hesitate to contact us if you have any questions. Manhattan Townhouses under $4M Manhattan townhouse inventory below $4M is predominantly located north of 96th Street though it may be possible to also find such a listing south of 96th Street which needs an extensive renovation. While new listings are down compared to last year (only 8 new listings of 1- to 3-unit townhouses priced below $4M since Phase 2 began versus 11 in the same time period last year), active inventory remains high with 60 additional units currently on the market. While these homes are currently priced conservatively at an average just under $1,000/SqFt, individual prices vary dramatically based on location, size, and renovation work required. While we are limited by a small sample size from which to draw conclusions, based on available information, in-contract listings had a price reduction of less than 4% on average, and homes that have sold since May 1 closed on average ~4.5% below asking price. Manhattan Townhouses over $4M On the higher end of the townhouse market in Manhattan, inventory has increased significantly since the start of Phase 2, with 23 new 1- to 3-unit listings versus 17 during the same time period last year, listed at an average price per square foot of just over $2,000. However, homes currently in-contract were priced much lower at an average of $1,737/SqFt, and had 3% price reductions on average from their initial asking. While only a handful of these townhouses have sold since mid-June, the 5 closed sales sold at ~$1,662/sqft, on average 17% below initial asking. Brooklyn Townhouses over $2M In the higher-priced tier of Brooklyn 1- to 3-unit townhouses, inventory is much higher compared to this time last year, with 46 new homes priced over $2M+ listed in the last two weeks (versus just 19 in 2019). There are 150 active listings, priced at an average of ~$1,150/SqFt. How these listings will perform remains to be seen. During the pandemic and immediately after, average price per square foot on closed listings was substantially lower. Similar homes sold under $1,000/SqFt on average from April 1-June 22, and for $1072/SqFt since June 22. However, the predictive value of this data is limited due to many factors, including limitations on showings and low levels of new inventory (as opposed to stale inventory that had been on the market since the winter or longer). Brooklyn Townhouses under $2M The Brooklyn townhouse market below $2M is a huge and varied segment. In some neighborhoods, like Brooklyn Heights, there may be no townhouses even available below $2M. In places like Park Slope or Boerum Hill, it is possible to find a property that is below $2M, but these are rare and likely means the property requires a gut or has some other issue. There are also many neighborhoods where most if not all of the inventory (from gut to brand-new renovation) lies within the $1-2M range. So, it is very hard to generalize. Add to that a problem with data -- while there are plenty of listings across Brooklyn, we have very little reliable data in some neighborhoods, particularly those further away from Manhattan. For that reason, we will be limiting the following analysis to 1- to 3-unit townhouses in neighborhoods adjacent to or north of Prospect Park in the $1-2M range. Since the start of Phase 2, there have been 119 new such listings compared to 86 during the same time period in 2019. This segment of the market tends to have little negotiability except for homes with major problems, i.e. those with title or occupancy issues or those requiring such extensive renovations they are not traditionally financeable. While this continues to be true generally, this summer buyers may be able to capitalize on the increased inventory to drive some negotiability. Listings that have closed since the start of May have sold, on average, ~7% below asking; however, negotiability ranged widely, as ~51% of these homes sold with no price reductions while on market, and closed less than 3% below asking on average, while the remaining 49% of homes reduced by an average of 8% while actively listed, and closed more than 11% below their initial asking prices on average.

Below is our recap of Q3, reflecting the first three months of resumed real estate activity in NYC, as well as our assessment of the market trends since Labor Day. In Manhattan, as expected, total number of closings were much lower (-46.3%) compared to last year due to a lack of signed contracts while real estate activity was suspended. Also as expected, new listings poured in as pent-up resale inventory from the Spring finally hit the market. This pushed active inventory levels up 30% versus last year, the fifth highest level in 20 years. Increased inventory coupled with lagging demand, particularly for smaller units, drove up days on market to 143 days from 91 days last year. For listings that have sold, the gap between the seller's ultimate asking price and the recorded sale price ("negotiability" or "listing discount") has widened and is now 8.9% compared to 5.1% last year. Despite these trends, the median sale price in Q3 actually increased in Manhattan, buoyed by a market-wide shift toward larger apartments and a relative increase in the market share of luxury and new development closings. The median sale price hit $1.1M (more than 7% higher than last year), but this corresponded with a 30% increase in the size of the average home, now a whopping 1,423 square feet. While there were 46% fewer closings market-wide this year than last, the $5M+ market saw only 24% fewer closings, and the market share of three-bedrooms grew (+6%) as that of one-bedrooms declined (-6%). This shift toward larger and more expensive properties may be the result of some luxury buyers seizing the opportunity to take advantage of lower prices in a softening market while those in lower price points have taken a more cautious approach in the wake of COVID. Early indicators since Labor Day show signs of recovery. In the last month, the numbers of new listings and contracts signed are even with 2019 for the first time since COVID. While buyer activity remains low in some areas and over a third of active listings have had price reductions, negotiability has been shrinking with post-Labor Day sales closing a median of 2.5% below last-asking (versus 8.9% for the full Q3) indicating that sellers and buyers are approaching an equilibrium. With interest rates still low, and sellers increasingly adjusting prices to reflect the current market, we are hopeful that Manhattan sales activity will continue to gain momentum and rebound back to pre-COVID levels. Across the river in Brooklyn the reported data continues to show resilience in the wake of COVID, with strong buyer demand and minimal negotiability across most of the borough. Signed contracts since Labor Day were up 6% compared to the same time period last year. Notably, the median price in BoCoCa (Boerum Hill, Cobble Hill, Carroll Gardens) now exceeds median prices in all Manhattan sub-markets except Downtown. Borough-wide, median negotiability since Labor Day was 1.4% (closed sale prices versus last asking price), but this was distorted by sales in South Brooklyn, accounting for more than 40% of all closings, where median negotiability was 3.3%. By contrast, median negotiability was 1.1% in the Brooklyn Heights, DUMBO, Downtown Brooklyn and Fort Greene sub-markets, and in the other sub-markets there was no negotiability. While reported Brooklyn metrics appear to be extremely positive, we have recently observed a marked change in the pace of Brooklyn sales. Perhaps because of the looming election and continuing uncertainty about COVID, many Brooklyn buyers seem to be more cautious, especially as prices have held steady. The frenzied bidding wars have ebbed, and many properties that would have, in different times, been in contract within days are instead sitting on the market for weeks without any offers. However, unlike in Manhattan where hesitancy has driven prices down, the increased time on the market has not translated to lower prices (at least so far), and sellers in the more expensive sub-markets seem to be getting their asking prices, but with patience. At the same time, because of low interest rates, buyers seem to be more willing to stretch their budgets to get their must-haves (usually outdoor space and washer/dryer) rather than compromise on a more affordable option.

Manhattan was off to the races In January with the strongest sales activity in the last 7 years. Signed contracts were up 26-27% compared to January 2020 and up 57% compared to September 2020. Many properties that had been lingering on the market since early Fall (or before) suddenly received multiple offers in December/January. In the same time period, there was not much new inventory, and anything appealing that came on was snatched up almost as soon as it was listed. While the data shows lower sale prices, the median and average prices were not substantially different than in January 2020, suggesting that the Covid effect was not nearly as drastic as many feared. Market-wide the sentiment in Manhattan seems to be that the bottom has passed, and buyers seem anxious to make deals happen before prices rebound further. With inventory still tight and buyers on the prowl, we encourage sellers to list now ahead of the Spring burst of inventory. In Brooklyn, things were quieter as contract activity was even with or below last year's levels and inventory grew. Closed sale prices were higher compared to both December 2020 and January 2020. As sale prices are a lagging indicator, the strong prices are a testament to the strength of the Brooklyn market throughout the Fall, when political and pandemic uncertainties had Manhattan largely paralyzed.

The real estate market had its strongest February in many years, with Manhattan sales leading the charge and even the decimated rental market gaining some ground. Much like its meteoric decline at the peak of Covid, the Manhattan market's recovery since the start of 2021 has been swift. February signed contract volume jumped by nearly 160% compared to September 2020, and was up 24% compared to just one month before. This sudden uptick in buyer activity in Manhattan ushered in increased absorption (with total inventory declining 4%), decreasing discounts, and the return of the bidding war, especially in Downtown listings priced <$2M. While February’s average and median sale price and PPSF figures were still slightly lower than early 2020 figures, there is a growing consensus that the Covid discount era in Manhattan is firmly over as the average discount from asking prices has shrunk to below pre-Covid levels. As the market heated up, many sellers were spurred into listing ahead of the traditional "Spring" market with new inventory in February up compared to historical levels. A combination of factors may have contributed to the recent rebound, including continued low interest rates, renewed optimism following vaccine news, federal financial aid earmarked for NYC, and the impending change in administration at Gracie Mansion. The recent v-shape recovery in the stock market and increased savings during the lockdowns has also grown the net worth of many would-be buyers. Across the river in Brooklyn, contract activity also increased in February, albeit less dramatically than in Manhattan. Contract volume grew by 9% compared to January, and was up 6% compared to February 2020, while average days on market decreased by ~3%. Discounts in Brooklyn remained few and far between, as the borough-wide average discount dropped to just 5% for homes sold in February, representing a 4% decline from January, and a 2% decline from last February (pre-Covid). Unlike in Manhattan, Brooklyn prices increased in February, with average and median prices up 4-5% from January, and up by double digits (~17%) compared to this time last year. New inventory levels in Brooklyn have been exceptionally low this year, and overall inventory declined another 4% between January and February, leaving many Brooklyn buyers waiting for the influx of new listings this Spring.

The red-hot market in Manhattan finally showed signs of cooling in April. The number of signed contracts declined month-over-month for the first time since December (-10.7% from March), and inventory levels increased (+5.3% from March). The most obvious reasons for the shift are rising interest rates and an expected seasonal increase in inventory in April (historically, inventory levels are highest April-June). Putting this into perspective, the market is still very strong, but this shift may be the beginning of a trend toward normalization after an unprecedented frenzy in the market. Closed sale data continued on an upward trajectory, but these figures are a lagging indicator reflecting deals that were negotiated and went into contract 2-3 months ago. Closed sale prices were substantially higher than in March (and up double-digit percentages year-over-year) reflecting the surging market during Q1. Properties spent less time on the market and traded at prices that were very close to ask versus last month and last year. Since the start of 2022, Downtown Manhattan neighborhoods represented the lion's share of sales and commanded the highest prices, with Nolita, West Village, and SoHo at the top of the list. On the other end of the spectrum, the lowest prices were in Upper Manhattan, followed closely by Midtown East, and then Battery Park City. In Brooklyn, rising interest rates seem to have had little effect on the market thus far – prices were up again across all metrics, and days on market and negotiability were down. Inventory did rise slightly, but not as much as total signed contracts. The number of condo contracts declined slightly despite an increase in corresponding inventory, but the data is not so significant as to represent a trend in our view. Overall, Brooklyn buyer demand remains high, and the market seems ready to absorb far more than this small increase in inventory. Since the start of 2022, DUMBO, Cobble Hill, and Boerum Hill have commanded the highest prices while homes in East New York / Brownsville, Prospect Lefferts Gardens, and South Brooklyn have sold for the lowest. Real Estate News Could renovation costs be coming DOWN in the near future? When interest rates rise, it also becomes more expensive to borrow against a home’s equity to pay for renovations. Less demand for renovation materials and labor could reduce some of the recent runaway prices. (MARKETWATCH) With mortgage rates on the rise, Manhattan’s residential market took a breather in April. While one month does not make a trend, April might indicate some stabilization of what has been a fiercely competitive Manhattan market. (TRD) The City is thriving, but renters who scored a pandemic deal now face rent-renewal sticker shock. Citywide rents rose 33% between January 2021 and January 2022, with some landlords offering renewals at up to double the discounted Covid-era rates. (NYTIMES) Interest rates just exceeded 5% for the first time since 2011, but that might not be the reality for many buyers who are taking out larger ("jumbo") loans or are open to adjustable rate and other loan products. (WSJ)