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March 6, 2007

REBNY Numbers Confirm Strong '06 for Brooklyn

On the heels of last week's announcement by HMS Associates that Brooklyn prices rose 8 percent last year comes the news from REBNY that the market performed significantly better in certain segments of the market. Median prices for one-, two- and three-family houses surged 16 percent while median co-op and condo prices rose 9 percent and 12 percent, respectively. "This report clearly shows that the strength of New York's residential real estate market is not limited to Manhattan," said Steven Spinola, president of REBNY. He added that the board sees "no signs that the current upward trend is slowing." Miller Samuel's Jonathan Miller went one step further when he said, "It's probably as hot as or hotter than Manhattan.'' Greenpoint had the highest increase in median sales price for apartments at 65 percent while the price per square foot average in Carroll Gardens was up a whopping 32 percent. Dumbo had the highest average condo sales price at $1,030,000.
Brooklyn Housing Market Surges in 2006 [Crain's]
Entire REBNY Press Release [The Real Estate]
Brooklyn Boulevard of Brokers' Dreams [NY Post]
Brooklyn Home Prices Jump 16 Percent [Bloomberg]
Brooklyn Prices Up 8% in '06, Appraiser Says [Brownstoner]

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Comments

Mr. B...

It would only be fair to go back and out all the naysayers (at least those experts quoted in articles) who said the market was going to tank...

Posted by: Anonymous at March 6, 2007 10:37 AM

If they had been right, they certainly would have wanted the credit...I'm especially thinking of some economist at NYU (I think).

Posted by: Anonymous at March 6, 2007 10:39 AM

It's still going to tank.

Posted by: Anonymous at March 6, 2007 11:16 AM

Yes. As I've always said, the naysayers are bound to be right some day. There have been some who've been predicting the crash on a monthly basis for the last two years. It's annoying.

Posted by: Anonymous at March 6, 2007 11:35 AM

This seems sustainable. No sign of bubble hysteria here.

Posted by: sean at March 6, 2007 11:35 AM

I'm still a naysayer. I still say it's going to tank. I still don't see how the Brooklyn real estate market can head in an entirely differenty direction than the rest of the country. Do people honestly believe that taking on a 30-year mortgage at this point (or any point in the last 4 years) is a good idea? It has nothing to do with whether the market tanks this month or next, or whether there's a hard or a soft landing. Mortgages are a long-term commitment. I would want to know that my house (co-op, chicken coop, whatever) would at very least appreciate enough to keep pace with inflation for the next few decades. I don't see that happening.

And for those of you who think that Wall Street bonuses can keep the whole city afloat, did you not have a little tiny heart attack this past week, watching the markets?

Posted by: sylvia at March 6, 2007 11:43 AM

I'm suprised anyone thinks the market is about to tank considering the stock market issues at the moment.

Posted by: Anonymous at March 6, 2007 11:45 AM

This is so tiring. Listen: people buy homes and take on mortgages for reasons more than just tripling their investment in two years. A lot of people want the security of knowing they can't be kicked out of their house (yes, you could default, but then a renter can "default," too) based on the whim of a landlord. Often, they want to invest in a place they know they will call home for a good long while.

Guess what? The paper value of my house (or your chicken coop) may go up and down over the years, and I am prepared for that. But in the end if you can afford the monthly, then you are well on your way to having some peace of mind that you are in control of your home and investing in your own future/equity. Stop with the bitterness!!!

Posted by: Anonymous at March 6, 2007 11:58 AM

I'm a bit confused by Sylvia's comments. Could you define "tank?" And what does a 30 year committment have to do with that aspect? If I have took out a 30 year mortgage on my property and, let's say for arguement sake, the market doesn't continue to appreciate with leaps and bounds? How does that affect me with my 30 year mortgage? People are still going to want and need to live somewhere. I will still want to live in my Brooklyn Brownstone.

I'm just not getting your point.

Posted by: NewStoner at March 6, 2007 11:58 AM

Sylvia, I can honestly say taking on a 30-year fixed-rate mortgage three years ago was a good idea.

Posted by: Anonymous at March 6, 2007 12:03 PM

Didn't notice that any of the articles mentioned Park Slope specifically. Any thoughts?

Posted by: TJD at March 6, 2007 12:10 PM

Sylvia: you don't have a clue. I agree wholeheartedly with the rational people who were more patient than myself to take the time to respond to you.

Posted by: Anonymous at March 6, 2007 12:14 PM

Sylvia: As I once read on a Salada tea bag - "Even a broken clock is right twice a day".

Posted by: Anonymous at March 6, 2007 12:23 PM

nyc housing market is definitely poised to tank. i'm also waiting for the dow to get back below 2000 before i buy back into equities.

Posted by: Anonymous at March 6, 2007 12:36 PM

Sylvia: You're really going out on a limb here (and this is what I find most annoying about the naysayers). You're predicting that the market might go down at some point during the term of my 30-year mortgage? Wow...you've certainly given yourself plenty of time to be right.

Here's a prediction from me: If you rent, you'll lose all your money.

Posted by: Anonymous at March 6, 2007 12:37 PM

um...12.36pm comment...

Dow down to 2000? if anything, i think you mean nasdaq...

Posted by: wayne at March 6, 2007 1:30 PM

that was a sarcastic remark, i'm guessing.

the poster was alluding to the fact that people continously come on here and talk about a crash and it ain't gonna happen. just like the stock market aint never gonna be 2000 again.

prices may go up and down, but they are never again going to be affordable like you sissies keep whining about.

either save up and buy a place or don't. please save us the tired speak about the impending crash in new york. we've been hearing it for 2 years now. aren't you sick of saying it and being wrong?

Posted by: anonymous at March 6, 2007 1:34 PM

Looks like Sylvia is the proverbial cat amongst the pigeons. She only offered an opinion. Why all of the negativity? I sold last year and probably won't be in the USA for long enough to warrant the purchase of a new residence, but does anyone really believe that prices always go up or that Brooklyn will buck the national trend, or that the stock market going down will push people into the real estate market?

I like to hear the bull and bear case on any market, but by people who's attachment to the subject is intellectual, rather than the emotional attachment that seems to dominate this forum.

Posted by: chris at March 6, 2007 1:35 PM

market looks cheap...i'm a buyer...stock mkt that is.

when GS stock hits $300, block party on me!

Posted by: wayne at March 6, 2007 1:37 PM

i think the talk lately of the stock market is a great one to make an example of to the naysayers of late.

a crash or a horrible day in the stock market these days was a 400 point drop that we saw last week. let's even say for arguement sake that it dropped a thousand points (which is HIGHLY unlikely). the point is that the market has done very well over the last 4 years and people have made some money...in some cases a lot of money.

the way people come on here and talk about real estate prices are that at some point in the near future, we are gonna see rock bottom prices on homes. that is not going to happen. we may have our equivalent of a 400 point drop or heaven for bid a 1000 point drop, but home prices are not going back to the way they were 10, 20 years ago.

so to say such, is just plain stupidity. people who wait it out, just like those who wait out the stockmarket will in all probablity be just fine.

the only people that will be affected are those who try to get in and get out with a huge chunk of change and let's be realistic. those are not really the people that are buying up real estate in brooklyn these days.
so to talk about crashes and such i think it's like talking about the stock market going down to 10,000 again next month.

it isn't going to happen.

Posted by: anonymous at March 6, 2007 1:51 PM

I pretty much agree with 1:51 although I do think there will be a significant correction at some point.

That aside its always interesting to see how worked up posters get at anyone who thinks the market will go anywhere but up. I own. I'm happy with it. Why do people get so angry when someone suggests the market may go down? If you are not comfortable with what you paid and/or the prospects for future appreciation getting pissed off on a blog isn't going to change your situation.

Posted by: Anonymous at March 6, 2007 2:41 PM

I can only speak for myself (anon 11:58). I actually said prices/values MAY GO DOWN. I also pointed out that there are more reasons than paper value alone to buy a house. Then people keep asking, "Do you people really think values will only keep going up and up?" Um, no, in fact I said the opposite, and so did several other people. "I can't believe you're so delusional to think prices will just keep going up and up." Um, noooooooooooo.

Posted by: Anonymous at March 6, 2007 2:55 PM

Is there a breakdown of REBNY's numbers by neighborhood?

Posted by: Anonymous at March 6, 2007 3:32 PM

hey 12.37:

how is paying for housing losing money? Is paying for food losing money? Is any time you pay for anything losing money? What on earth are you talking about? Theres a difference between spending and losing, get a dictionary.

Posted by: Anonymous at March 6, 2007 3:34 PM

People, people. I mean, I know it's hard to enter a fake name and stick to it for one single conversation, but honestly, for the sake of clarity, could some of you just call yourselves Dick or Harry or David Lereah and stick with it? I don't even know who to answer, so I guess I'll just ignore all the anons...

NewStoner: I personally think that the nationwide housing bubble was driving the national economy over the last several years, and now that it has burst, we're going to start seeing some nationwide fallout. Subprime mortgage lenders imploding are just the beginning.

I would venture say that the real estate market takes longer than other markets to reflect downward trends, and that the NYC market in particular has not caught up with the national realities. But I think it will. I don't really see any way around a national recession, and while some people might feel comfortable taking out a 30-year mortgage with a recession right around the bend, I don't.

And if you think a national recession just isn't going to happen, ok, fine. But even Mr. Greenspan agrees with me that it's not just possible, but probable.

Posted by: sylvia at March 6, 2007 3:55 PM

From MSNBC.com:

Former Federal Reserve chairman Alan Greenspan was quoted as seeing a “one-third probability” of recession in the United States this year, according to an interview with Bloomberg.

“We are in the sixth year of a recovery; imbalances can emerge as a result,” Bloomberg quoted Greenspan as saying.

“Ten-year recoveries have been part of a much broader global phenomenon,” Greenspan said in the interview.

- Granted, prices being what they are, there's a bigger likelihood of a downturn, but one, I need a place to live. Two, even if there is a downturn, I don't plan on selling 'cause I need a place to live. And three, prices could still go up, and I still need a place to live.

Unlike condos, they aint building any more brownstones and they're hot properties for folks that 5 years ago wouldn't want to move to Brooklyn. We got discovered.

There's always the "rent" arguement but the fact is for me it costs less to own my 2-fam than to rent a similar duplex.

Posted by: John at March 6, 2007 4:34 PM

thank you john for highlighting once again sylvia's inaccuracy.

a one third probabilty does not mean "probable," sylvia. probable indicates more than half. a classic case of someone twisting words to meet their own arguement.

Posted by: anonymous at March 6, 2007 4:40 PM

All right, I agree that calling a 1-in-3 chance of a recession "probable" might be stretching it. But not necessarily. And quibbling about the vocab doesn't change the fact that a 1-in-3 chance of a recession certainly doesn't make a recession "improbable".

And for the record, I'm not holding Mr. Greenspan up as the most reliable authority on the subject, either. I would venture say that he has to be careful what he says, for fear of disrupting investor sentiment, wouldn't you agree? I mean, he so much as mentions that there is the possibilty of a recession, and the markets drop 400 points. And then he's quick to qualify it as "only" a one-third possibility.

Here's someone else who knows more than I do, explaining it better than I could:
http://bigpicture.typepad.com/comments/2007/03/all_is_fine.html

Posted by: sylvia at March 6, 2007 4:58 PM

Hey, 3:34...I'll put a finer point on it for you:

You have a two choices (three, if you count living at home with your mommy): You can either buy or rent. This blog string is a discussion of real estate in market/investment terms. If I rent, I don't get my money back. You're right, you do get to use the apartment...Kind of like buying and eating a can of peas, right?

When you buy you might not see any kind of return on your investment. But there's a good chance you will. I bought my apartment 8 years ago for $217K. What's it worth now? $900K. I could have been paying rent all these years, which I guess would have been fine. Instead, though, I've built equity in a piece of property. Hey, man, I'm getting payed to live in NYC. Cool, huh?

Does that help?

Posted by: Anonymous at March 6, 2007 5:01 PM

i don't think anyone who has claimed that a recession is even a 1 in 3 chance of being possible that this will directly affect real estate prices in brooklyn.

i don't think that brooklyn is recession-proof, but i personally don't think anything but up to a 10% correction might occur at worst, which still doesn't really answer why people who need a home to live in would not consider buying when everyone around them are making that much, and sometimes more PER YEAR on their home (and investment).

Posted by: anonymous at March 6, 2007 5:03 PM

5.01. Yes, thanks for the digression.

Anyway, look up "spend" and look up "lose". Heres a clue - if you spend it you receive something in return - in this case a roof over your head. No ones arguing you can't make money in real estate. Try not to be a dingdong.

Posted by: Anonymous at March 6, 2007 5:05 PM

I'm ok with a recession. Its a great preserver of old things in a perverse way. Too much wrecking of the old fabric and replacement with new (scarano) places when the economy is going gangbusters.

Posted by: Anonymous at March 6, 2007 5:08 PM

To be more exact, the right way to think about the buy/rent mathematics is that currently, it still costs more to buy after tax benefits, after equity build, etc than it does to rent the same space.

The bet here is that your levered return on the downpayment will outperform the investment you could have made with the downpayment in the market. Now if real estate appreciation falls to typical 1-2% above inflation, that can play out to be something like 8-9% on a levered downpayment...So...depending on what you think you can do by investing in the markets vs what your levered return on a slower growth real estate property should be the more calculated method of determining whether you should buy/rent.

The caveats, the "qualitative" benefit of owning vs renting, and you're still making a bet on the market, whether its housing or equities...so no one really knows until you actually cash out of your investment down the line.

Posted by: wayne at March 6, 2007 5:27 PM

I really don't have to even comment because there was some excellent points made this time (for a change). But I side witrh those who consider housing like food. Granted the cost of food and housing has different impacts. THe price of real estate should be altered at some point. The sooner it does the sooner the market is back on track. Those of you who blogged that this is going to tank and the end oof the world is coming are mistaken you just don't have a better way of venting your frustrations than wishing for doom. You will be non owners of homes long after this market condition is over. As I always say I am a home owner in the neighborhood, I look forward to the Atlantic Yards and I can wish all of you ill wishers the best. Your tank will be back soon!

Posted by: anon at March 6, 2007 5:38 PM

The real estate market almost always seems to be high. Especially when you're looking to buy into a decent quality of life. If you must wait to buy a home, the stock market is on sale right now. If you've got some cash to invest medium-term, get an index fund. Whenever the real estate market tanks, dump the equities and buy a house.

Posted by: Hal at March 6, 2007 6:08 PM

what's the correlation between the equity mkts and the housing mkt, are they inversely related? i think the past year or 2 showed that they were positively correlated, but i thought historically they were inversely?

reason i ask is if the equity mkt cracked, then your investable dwnpymt would be lower so you just got burned...if they're inversely correlated, then Hal's comment would work.

Current market conditions would tell me that given where rates are, it really can't get much lower, subprime is blowing up so lenders are tightening liquidity, market's been rallying up through early last week...what would the potential be that both equity mkt and housing mkt both tank?

Posted by: wayne at March 6, 2007 6:21 PM

Wayne!
Thank you very much!!

Sylvia, usually a recession is a "hind sight" realization, so until we're coming out of it, we won't realize we've been in it. So for right now, I think we're OK.

The majority of loans on properties in brooklyn were NOT sub prime loans, and were NOT ARMS. Now, for those folks that are unfortunate and could only come by a sub-prime floater, they could very well be in trouble if those adjustments start to kick in, and they haven't seen the 30% increase in valuation for their properties, and one of their tenants stopped paying rent. Yea, those folks may have a problem.

But for someone that has a FIXED, 30 yr mortgage... their property value not going up is not going to adversely affect them.

But as Wayne pointed out, if you think it was negligent to get a 30 year mtg in the last 2 years or so, and would have been better off in the market, well, let's see what you would have gotten.

If you simply rented your place and kept your 20% down payment that you must have had on that $1mm brownstone and invested in the S&P. From Jan '05 until today, your $200K would be worth $227k today. OK... good for you... But how much is that $1MM Brownstone Today? Do you think it's more or less than the $1.13MM you suggest?

I'm thinking maybe $1.6 or even MORE!!
Now, I'm not saying it's going to be worth $2MM next year... it may only be $1.7 or God forbid... Let's say the market slides 12% in the next month and if falls to $1.4.....

Guess what.... You're still screwed! because you need $280K Down payment and I don't think you've made that much in the market.....

Unless, like Wayne you plunked it all in GS stock.... And was a Goldman Partner at that! :-)

I'm sorry

Posted by: NewStoner at March 6, 2007 6:28 PM

The correlation between the two markets its fairly loose. That R squared ain't gonna be that high on that one. But the rational could make you think it's a stronger relationship than it actually is.

A True inverse relationship is simply interest rates and bond prices. People Selling out of a highly valued equity market tend to put that cash in fixed income instruments.

Thats not thinking of people that are FORCED to sell because the market is tanking and they just take their cash and hide it under the mattress.

They dont say, hey I better go buy a house now.... The Market is tanking.

It's the low interest rates and the creative financing that makes people believe they can afford more house than they thought they could.

Posted by: NewStoner at March 6, 2007 6:34 PM

Hey, 5:05...I got a dingdong for ya', right here...

Posted by: Anonymous at March 6, 2007 7:59 PM

"they aint building any more brownstones"

We haven't run out of dilapidated brownstones neither. If demand (I mean financially-backed demand) was very strong, we WOULD have run out. Everything would have been renovated and ready for move-in. Dilapidated brownstones are almost the equivalent of vacant land. You damn near have to build a new house from the inside out.

Posted by: Anonymous at March 6, 2007 8:40 PM

gpt growth rate is skewed. there was a lot more new development inventory in 2006 than in 2005. of course the median will substantially increas when you go from very little inventory in older buildings to a ton of new condo developments. the interesting thing to watch is whether the median still goes up in 2007 when we get the drop on the inventory overhang and the economy sputters in 2H07.

Posted by: gpt at March 6, 2007 9:47 PM

Does anyone know the percent change in transactions from the beginning to the end of 2006?

Posted by: Anonymous at March 7, 2007 1:39 PM

1:39 PM asked a good question. Didn't unsold inventory levels also increase markedly in 2006?

Posted by: skeptic anon at March 7, 2007 11:12 PM

« Tuesday Links Bay Ridge Church Selling Its Soul For Condos »

March 6, 2007

REBNY Numbers Confirm Strong '06 for Brooklyn

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