Open houses play a crucial role in the real estate market, allowing potential buyers to experience a property firsthand. While online pictures can provide valuable information, certain aspects like the atmosphere, layout, and size are best assessed in person. As the number of buyers dwindles, sellers often rely on more open houses to secure a sale. In this report, we analyze the ratio of open houses to contracts signed to gauge the market’s strength in Manhattan and Brooklyn.
Seasonality
Spring and fall are traditionally busy seasons for real estate, reflected in the increasing number of open houses during these periods. Sellers aim to attract buyers while the market is favorable. Similarly, the volume of signed contracts typically peaks between March and May.
The OHCS Ratio
To assess the market’s health, we calculate the Open House-to-Contract Signed (OHCS) ratio. A lower ratio indicates a stronger market, requiring fewer open houses per deal, while a higher ratio suggests a weaker market, necessitating more open houses. Additionally, a higher OHCS ratio signals that price may be a more important factor, while a lower OHCS ratio hints that demand may exceed supply. Taken together, the OHCS ratio can shed light on the current state of the market and provide useful information for buyers and sellers.
The Manhattan Market Is Cooling
Reviewing the Manhattan OHCS ratio over time provides valuable insights. In early 2022, as the recovery market reached its peak, the ratio remained low. It steadily climbed into the summer, reaching its peak in October 2022, driven by uncertainty surrounding rising mortgage rates. The ratio then declined for the start of the busy season in 2023, with a temporary rise in April due to the unusual gap between the Easter and Passover holidays. Notably, contract volume in June 2023 fell approximately 6% below the 10-year average, leading to an increase in the number of open houses and a subsequent rise in the OHCS ratio. Overall, since March, the trend has been upward, indicating ongoing challenges for sellers in the Manhattan market, despite a return to seasonal patterns following the COVID-19 disruption.
The Brooklyn Market Is Hot
Brooklyn follows a similar pattern, with seasonal fluctuations shaping market trends. However, unlike Manhattan, the OHCS ratio in Brooklyn shows a declining trend, indicative of a more stable buyer pool. While this may change during the slower summer period, the current data suggest that Brooklyn’s market is strengthening, despite a slower start compared to Manhattan.
Comparing the Boroughs
Comparing the OHCS ratios of the two boroughs reveals contrasting dynamics. Manhattan’s ratio is rising, with the low in May surpassing the low in March. On the other hand, Brooklyn shows a lower ratio in May compared to March. Although we anticipate an increase in OHCS ratios during the usually slower summer season, the current levels indicate that selling property in Manhattan remains more challenging than in Brooklyn.
What those dynamics mean for buyers, sellers and real estate professionals
In conclusion, this simple ratio demonstrates the importance of open house trends in assessing the real estate markets of Manhattan and Brooklyn. While Manhattan faces ongoing challenges for sellers, Brooklyn exhibits signs of a strengthening market. Understanding these dynamics can assist buyers, sellers, and industry professionals in making informed decisions and navigating these dynamic markets effectively.
Let’s break it down.
- Manhattan buyers: The combination of the typically languid summer season, as compared to spring, and the rising OHCS ratio signals more choices and negotiating power. For those actively shopping in Manhattan, now might be a good time to be more selective and negotiate for better terms or prices.
- Brooklyn buyers: Even though the market usually slows in summer, the general downtrend of the OHCS ratio indicates that the Brooklyn market is continuing to move apace. Buyers actively looking in Brooklyn may need to make decisions more quickly with less room for negotiation.
- Manhattan sellers: Active Manhattan sellers should infer from the rising ratio that it’s becoming harder to sell houses. With that in mind, they may need to consider adjusting their prices or improving their property’s appeal to attract buyers, e.g. fresh paint, staging, appliance upgrades, etc.
- Brooklyn sellers: For current Brooklyn sellers, the falling OHCS ratio signals a strengthening market with homes becoming easier to sell. Despite the slower seasonal nature of summer, sellers with in-demand properties may be able to hold out for higher offers and favorable terms.
- Manhattan real estate professionals: Patience is the key as the rising OHCS ratio likely directly translates into increased frustration. Aside from repricing, consider reviewing your current marketing strategies to improve their effectiveness and better understand how your open house creates first impressions.
- Brooklyn real estate professionals: As the OHCS ratio ticks lower, your clients may need to make quicker decisions or present more attractive offers in order to achieve the outcomes they desire. That may require gaming out multiple pricing/bidding strategies at the same time in order to cover contingencies.
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