Is Brooklyn Headed for a Crash?

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The Brooklyn market will soon plateau, according to a speaker on a real estate panel, AJ Pires of Alloy, at TerraCRG’s Brooklyn Real Estate Summit Tuesday. That doesn’t necessarily mean we’re in a bubble, although we could be, according to a story in the Commercial Observer. “It feels like 2005 a little bit,” said a different speaker, Roger Fortune of 388 Bridge’s Stahl Organization. “My question is: will it be a hard or soft landing.”

That project was planned to be a condo building, but when financing fell through, the firm turned the building’s base into 80/20 rental housing with condo units on top.

Speakers cautioned developers to avoid problems like that by not borrowing too much, and to invest in high-end amenities. As is well known by now, Brooklyn “is no longer just a value play” for residents, said the panel. “People want to be here because of the lifestyle, not just because it’s cheaper,” said Lightstone Group President Mitchell Hochberg. Since more people who work in Manhattan are now living in Brooklyn, that’s why neighborhoods with the best transportation to Manhattan have changed most quickly, according to the panel.

The panel singled out Gowanus, Red Hook, Bushwick and Greenpoint as the neighborhoods “next in line to progress.” Condo prices have nowhere to go but up, said the panel. Lightstone’s Hochberg said the second phase of the firm’s controversial 700-unit Gowanus development may turn out to be condos after all.

Apartment buildings are going up at a frenzied pace. Do you think demand and financing will keep up? Is this sustainable?

Brooklyn Developers Offer Sage Advice at TerraCRG Summit [NY Observer]

22 Comment

  • I’m confused. Do “condo prices have nowhere to go but up” or are we at a plateau?

    • Cate

      Most new construction in Brooklyn is rentals. Very very few condos. I wasn’t there so I don’t know exactly what the panel said beyond what I read in the Observer, but maybe they mean rental prices (for these zillions of new buildings going up) will plateau soon — not meaning they will plunge, but meaning they won’t keep going up, up, up. Rents are almost at parity with Manhattan now.

  • I don’t get it… so the market is artificially inflated and we’re heading for some sort of turn around but the market is only going to grow and values will continue to increase? Seems contradictory.

  • I am no sage or claim any knowledge outside of what I have seen first hand.. A friend of mine is moving from San Francisco to Brooklyn. She asked for my advice and my reflex was to say, you should move to BedStuy, it will be more affordable.

    So, one sunny afternoon about 3 weeks ago, we looked at a few places. We look at 420 Bedford Ave. The apartment was like 850 square feet with a private backyard. The price was I think 750 k.

    We then looked at a place in Park Slope.. It was 900 square feet with a shared backyard. The same space essentially. The same damn price, the apartment in Park Slope was actually slightly nicer.

    Shocked, I asked my Broker friend, how that could possibly be. Crime and schools, she happens to be pregnant, are issues for her.

    She told me that every person moving from Manhattan that she speaks to, wants to move anywhere but, Park Slope. They want something more gritty, more young and hip. And to them, Park Slope is not even a consideration.

    So, what I have been seeing is, you can get the same one bedroom on a nice quiet street, close to better schools, in a safer area, for the same price.

    I don’t know, I have been watching Manhattan real estate for 20 years and didn’t think that was sustainable. Now I am seeing one bedrooms going for 3/4 of a million in Bedstuy and I can’t imagine that would be sustainable too. But, who knows.. I don’t know who these people with limitless wealth are but, they seem to be out there.

    • 420 Bedford Ave = Williamsburg

      • Shit, you are correct. It was actually 420 classon. On the clinton hill border.

        • ah gotcha! but yeah – you’re definitely right. lots of people have the “anywhere but park slope (and sometimes wb)” mentality.

          • NeoGrec

            Déjà vu. I’m late to this thread but, fwiw, in 1988 everything I was looking at in Park Slope (where I then rented) seemed way too expensive. So I decided to look in the West Village. I found a sweet 600 sq ft coop for $120k. No outdoor space or working fireplace but otherwise almost identical to what was on offer in the Slope at that time. After 10 happy years, I moved back to Brooklyn for more space. But no one ever believes me when I tell them I found a better value in Manhattan! So the moral is, skip Bed Stuy and don’t be embarrassed to avail yourself of the far superior amenities of an already well-established neighborhood.

    • Cate

      WhiteStone, that is a really really interesting story. Was the Bed Stuy apartment new construction and the Park Slope apartment not new construction? Re everyone not wanting to move to Park Slope, I’m surprised to hear that since some recently published stats said it was one of the leading neighborhoods for new lease signings (rentals). I have been seeing some prices lately that show Bed Stuy and Park Slope are getting closer in price.

      • Not surprising. Look at what happened to Brooklyn Heights prices vs other now prime brooklyn neighborhoods. People want to live where the trendy new restaurants are, not near a street like Montague. Also depends what stage of life people are at…..if schools matter, certainly wouldn’t be saying “anywhere but park slope”.

      • it was essentially the same apartment, except Park Slope was perhaps 50 feet bigger but, had a shared yard instead of a private yard. But, same first floor of a brownstone with the same dimensions and same floor plan. I think the kitchen equipment may have been nicer in Park Slope

  • My wife and I have been looking for 2 bedrooms for more than a year. When we started, the broker would say, “we will need an offer before you leave.” Insane. In the last few weeks we’re getting follow up phone calls and emails from brokers asking us (nicely) if we plan to make an offer. Not sure if this means we’re in a bubble or prices will drop along with the sky. But there has definitely been some sort of shift or adjustment. So we’re going to wait.

  • landlord

    My recent rentals in Park Slope created a bidding war. But as Bdeis01 stated, their stage of life reflects greatly on where they choose to settle. Park Slope is definitly not “gritty” and I see fewer inhabitants in their early 20′s and more couples in their late to early 30′s.

    • Bed-stuy is gritty, if living next door to someone who paid $2million in cash for a renovated brownstone because of the pier mirrors, parquet, and the name of the architect qualifies as gritty.

  • The bubble crashed before–I think it might again if something triggers it–but the way the economy is growing and urbanism is so trendy I don’t know of prices will drop all that much. The east village was just as expensive as the west village for years too. Ditto lower east side and soho.

    I just hope more neighborhood schools get more funding and programs for all the kids in them–not more separate and not equal schools for new arrivistes.

  • Remember Hoboken? Has not seen a crash yet, Park Slope, no way, Brooklyn Heights, hardly, Bedford Stuyvesant, has not even reached its peak yet. Brooklyn has always been undervalued and is simply catching up. The more you build, the more people will come, there will always be a strong demand in NYC, particularly in trendy areas. It’s interesting that we are already talking about bubbles, as news continues to pour in of new developments in the area. NYC does not play by the same rules as others, you know this, why ask these questions, the answer is in the same articles you post on a continuous basis.

  • I’ve also been looking over the past year. I agree that much of the pricing and bidding defies logic. A broker recently told me to start looking at 100k under my price range, and overbid on everything by 100k.
    I understand that some people are paying with all cash, which means no inflated adjustable mortgages like 2008, but where does the cash come from? What things are they not buying because they spent this cash on their house?
    What happens when the middle income folks who bought a 2 family on the Eastern edge of Bushwick or Bed-stuy or Cyprus Hills go to rent out the unit and they can’t get a rental income that covers a decent chunk of their mortgage? Does that mean that they are paying more than 36% of their income on their mortgage?
    Western Brooklyn may be frothy and wealthy but after a certain Eastern point, everything is built on folks with low income wages, renting. Low income wages haven’t gone up. Certainly not enough to keep up with real estate.

  • Cumberland Yo

    once after b’way junction is completely developed, then the boom will end.

  • james_s

    Simple case of supply and demand in most parts of Brooklyn. There’s far more demand than supply as far as condos are concerned. Specifically, i’m referring to 2, and especially 3-bedroom type units geared towards families. DUMBO, BK HEIGHTS, COBBLE HILL, Boerum HILL, CARROLL GARDENS…as soon as a 2 or 3 bedroom comes on the market, there’s immediate interest , if priced right.