If you read real estate market reports or almost any article in the real estate section of the news, it might seem as though New York City home prices are constantly fluctuating: One month prices might set a record-high and the next month they plummet. Price volatility is seen in New York City, which is largely considered one of the world’s safest markets, mainly because of a reliance on the median sales price.

While the median sales price is a useful metric for tracking how much buyers are willing to pay for a given month’s batch of homes, it is a terrible metric for tracking home values (that is to say, all homes in New York and not just those that sold in a given month.) This is called an inventory mix problem. In short, the mix of homes that sell in August might have very different characteristics from the mix of homes that sold in July, which can lead to price volatility month-to-month. To see just how volatile monthly median sales price is in Manhattan and Brooklyn, a 20-year time series is graphed below. We can all agree that the New York real estate market isn’t as volatile as chicken wing prices.

To get a better understanding of how New York City home values have changed over time, we recently introduced our brand-new flagship home value metrics called the StreetEasy Price Indices. Armed with 20 years of sales records in Manhattan and 11 years of sales records in Brooklyn, the StreetEasy Research team used a repeat-sales methodology to build a portfolio of indices that track the changes in median resale prices of all home types for both boroughs and in five major submarkets within each. More about the nuts and bolts of the StreetEasy Price Indices can be found in our methodology post.

[tableau server=”public.tableausoftware.com” workbook=”medSaleVsSPI” view=”TimeSeriesWindow” tabs=”no” toolbar=”” revert=”” refresh=”” linktarget=”” width=”600px” height=”600px”]The StreetEasy Price Indices provide buyers, sellers and homeowners with a new way to understand the evolving value of homes in the incredibly complex Manhattan and Brooklyn real estate markets. The indices can also be used to understand differences in value between boroughs and major submarkets. Most importantly, however, they eliminate the pesky inventory mix problem that creates the volatility seen in the median sales price time series.

How Much Has Your Home’s Value Changed? There’s an Index for That

For current homeowners, the StreetEasy Price Indices can answer an important question: How much has my home’s value changed?

According to our most recent Index data, resale prices in both Manhattan and Brooklyn have increased well beyond the previous market peak in the mid 2000’s. The important phrase to note here is “resale prices.” We start with the assumption that one month’s batch of home sales may not be a whole lot like your specific home for a number of reasons: location, size, floor number, age, and physical condition among countless others. We address that disconnect by comparing one month’s worth of home resales to more than a decade’s worth of prior resales to arrive at our StreetEasy Price Index values. Current homeowners and potential buyers can look to the StreetEasy Price Indices as an indicator of what their home value could be if they were to sell or buy a home – any home – in the current market.

Comparing Value Between Boroughs

Let’s start with Manhattan. The median resale prices of all homes rose 6.3 percent from this time last year to $983,207, according to the Manhattan Price Index. This is the highest index value on record and 12.5 percent higher than the previous market peak of $843,000 set in April 2008. Not surprisingly, homes located in Manhattan’s Downtown submarket, which includes pricey neighborhoods such as Tribeca, Soho, and Greenwich Village, have the highest median resale price at $1.2 million. Homes in the Upper West Side submarket have the second-highest median resale price in Manhattan ($1.1 million), followed by Upper East Side ($958,000), Midtown ($854,000) and Upper Manhattan ($566,000).

[tableau server=”public.tableausoftware.com” workbook=”priceIndices” view=”StreetEasyPriceIndex” tabs=”no” toolbar=”” revert=”” refresh=”” linktarget=”” width=”600px” height=”650px”]In Brooklyn, the median resale price of all homes rose 5.3 percent from last year to $524,171 according to the Brooklyn Price Index. This is also the highest index value on record and 7.1 percent higher than the previous market peak of $497,000 set in November 2006. When measured across whole boroughs, Brooklyn’s median resale price was roughly half that of Manhattan’s in June.

Of course, some Brooklyn neighborhoods outperform others. Homes located in the Northwest Brooklyn submarket, which includes DUMBO and Brooklyn Heights among other neighborhoods, have the highest resale price at $868,000 – approximately 66 percent greater than Brooklyn’s.

Homes in the North Brooklyn submarket, which includes Williamsburg and Greenpoint, are not far behind with the second-highest median resale price ($867,000), followed by Prospect Park ($772,000), East Brooklyn ($380,000) and South Brooklyn ($373,000). East Brooklyn and South Brooklyn are the largest submarkets by number of housing units, yet they lag far behind the rest of Brooklyn by median resale price and thus bring down the overall Brooklyn median resale price.

The Rise and Fall of Markets During the Housing Bubble

The graph above also shows the dramatic rise and fall of the East Brooklyn submarket, which includes Bedford-Stuyvesant, Brownsville, Bushwick, Crown Heights and East New York. After peaking in October 2006 at $610,000, the median resale price in East Brooklyn fell by a remarkable 56.9 percent to $263,000 in March 2011. By contrast, Brooklyn home prices fell by 20.1 percent between market peak and trough. No other submarket in Brooklyn or Manhattan experienced a decline in resale price quite as dramatic as East Brooklyn. The Manhattan market peaked in April 2008 with a median resale price of $842,000 and then subsequently fell 16.1 percent to $707,000 in November 2009. The Upper East Side market saw the greatest decline in Manhattan, falling 18 percent from a peak of $934,000 in May 2008.

Since New York City’s housing market bottomed out, resale prices have seen consistent and at times robust growth in most of the submarkets in Manhattan and Brooklyn. With the rise of brand-new residential buildings and retail, the Downtown Manhattan submarket experienced double-digit annual growth in each of the 13 months between August 2013 and September 2014. Similarly, the North Brooklyn market experienced double-digit annual growth in median resale prices for 26 consecutive months between January 2013 and February 2015. The dramatic rise of North Brooklyn reached a fever pitch in September 2013 when annual growth in median resale prices was 27.7 percent – the highest annual growth rate recorded among any Manhattan or Brooklyn submarkets in StreetEasy records. Even in hard-hit East Brooklyn, prices have recovered modestly since bottoming out in 2011, although it remains one of the least expensive markets across Brooklyn and Manhattan, along with South Brooklyn.

Resale Price Growth Slowing Across Manhattan and Brooklyn

Although prices are historically high, growth has slowed considerably across the two boroughs. In July, the Manhattan Price Index grew 6.3 percent from last year — a much slower pace compared to 9.5 percent in July 2014. The Brooklyn Price Index increased 5.3 percent year-over-year, less than half the July 2014 growth rate of 10.9 percent.

Median resale prices are growing the fastest in the Northwest Brooklyn and Upper Manhattan submarkets. In Northwest Brooklyn, median resale prices grew 10.1 percent over the last year to $841,000. In Upper Manhattan, resale prices rose 9.6 percent in the last year to $530,000.