(Most) Brooklyn Prices Continued to Rise in Third Quarter

Even if you set aside the caveat about the three missing neighborhoods, this report is hardly full of "good news," at least not for sellers. A healthy market for a seller is one in which he/she is able to sell their property quickly, at a price they think is fair. But that's not the case in the Brooklyn the report describes -- otherwise sales wouldn't have fallen 36% in the quarter. The HMS vice president in the story is quoted as saying, "The Brooklyn market has been amazingly strong. Sellers have not given in to the pressure to lower prices to attract buyers." But this is a bizarre definition of strong, because the consequence of not lowering their prices has meant that a huge percentage of sellers haven't been able to find buyers.

This also speaks to the supposed "lack of inventory" on the market. Unless you believe that people in Brooklyn suddenly decided en masse to stop putting their homes up for sale, the reason there's a lack of inventory is because owners realize that the market has weakened, and that they're not going to be able to get the prices they want. The incentives to sell have decreased significantly from a year ago, and so people are just sitting on their properties, rather than putting them on the market and watching them not sell.

Posted by: guest at October 12, 2007 9:40 AM

9:40am...not bad points, but I think readers need to consider the investor-driven dynamics of a real estate boom. Housing inventory comes from existing homes being offered for sale as well as new construction and "flip-jobs" offered for sale. It is very likely (and frankly more probable) that the retreat of investors has driven the decline in inventory on the market. Keep in mind that during the boom, many people flocked to purchase properties, hold them for a short time and/or fix them up, and put them back on the market for re-sale. As this activity decreases, there will inherently be a decline in sales activity, as the existing owners (i.e., non-flippers) begin to make up the bulk of sales activity.

Also, consider that mortgage rates were very low for a while. Low rates motivated many people to buy homes they would actually live in and not move for a while. Not putting their homes on the market also detracts from sales activity.

I wouldn't read the article as "bad" news, particularly when you consider the change in market dynamics.

Posted by: guest at October 12, 2007 10:02 AM

In short,

Low inventory because demand is sweeping up supply: Strong Market

or

Low inventory because sellers are holding out in hopes of higher prices: Weak Market

Which one is it?

Posted by: guest at October 12, 2007 10:35 AM

I think inventory is so low because some many people just bought their townhouses in the past 5 years. Those buyers aren't going to sell again until after they've been in thier homes for 10+ years.

Posted by: guest at October 12, 2007 10:42 AM

"We provide fast and professional form and narrative reports, field and desk reviews and other products designed TO MEET THE SPECIFIC NEEDS OF LENDERS, DEVELOPERS, OWNERS AND ATTORNEYS." - http://www.hmsassociates.net/

Posted by: guest at October 12, 2007 10:52 AM

10:42, then why was there a 36% decline year over year? Was the number of people who had bought townhouses within the last five years so much smaller a year ago? Unlikely. If prices were still booming, there's no doubt there would be significantly more inventory on the market.

Posted by: guest at October 12, 2007 10:54 AM

"Those buyers aren't going to sell again until after they've been in thier homes for 10+ years."

...because they're guaranteed NOT to lose their jobs, guaranteed NOT to relocate and guaranteed NOT to divorce.

Posted by: guest at October 12, 2007 10:57 AM

it doesn't matter why inventory is low.

it's low and that's what matters in this case.

Posted by: guest at October 12, 2007 11:02 AM

amen 11:02

put up a desirable property for sale and you'll have no problem selling and a great price

key word is desirable - location, style, condition, etc

Posted by: guest at October 12, 2007 11:16 AM

"Which one is it?"

The latter. Tragically, there's still many buyers and recent owners out there that think NYC real estate only goes up. They wouldn't sell at today's prices even if they could because they just bought. They're waiting for further appreciation. If the market succombs to gravity (recession and layoffs) and the consensus of owners understands this, there will be lucrative opportunities in sign-making.

I remember during the euphoric times of '04-'05 when many listings had no external "For Sale" signs out front, just classified ads in the Times. That has changed.

Posted by: guest at October 12, 2007 11:19 AM

It seems that if condo prices continue to fall, there's no way that won't drag down co-op prices and even home prices. Yes, some or even many people may prefer houses or pre-war co-op buildings, but if it becomes that much less expensive to buy a new condo, then demand for the more expensive product will inevitably slip.

Posted by: guest at October 12, 2007 11:28 AM

Um....as condo prices fall (which also has to do with the poor construction) I believe co-op prices will actually rise even further, 11:28.

They will become more coveted as these aging crappy new condos sit and deteriorate.

Pre-War will be making a huge comeback in the next 5 years. Mark my words.

Posted by: guest at October 12, 2007 11:32 AM

Co-ops will go down with condos in the next 5 years. They did so before and they will do so again. Prewar will only be 'the last skydiver to jump out of the plane'. It may land on a building or a tree but it will still jump. Mark my words.

Posted by: guest at October 12, 2007 11:51 AM

"Um....as condo prices fall (which also has to do with the poor construction) I believe co-op prices will actually rise even further, 11:28."

Sorry, but that doesn't make the slightest bit of sense.

Posted by: guest at October 12, 2007 12:29 PM

"Um....as condo prices fall (which also has to do with the poor construction) I believe co-op prices will actually rise even further, 11:28.

They will become more coveted as these aging crappy new condos sit and deteriorate."

Um, that's preposterous. The new condos are, at the least livable, due to buiding codes. That means that they are very much in the same housing market as pre-war co-ops. The prices of the two are therefore tied. Let's imagine that the price of a crappy 2-br condo goes to $300k, and that price accurately reflects the condo's durability, location, future appreciation, etc. A pre-war next door will have to compete not only on the basis of durability, location, and future appreciation (on which it will have the condo beat), but also with price, and at some point, the price difference will be large enough that it outweighs other factors. No rational economic actor would fail to make the comparison, and over time the market will roughly resemble the behavior of a rational economic actor.

This is pretty basic economics.

Posted by: guest at October 12, 2007 12:34 PM

"Um....as condo prices fall (which also has to do with the poor construction) I believe co-op prices will actually rise even further, 11:28."

Please show me one example of where condo prices are "falling" - and please dont cite brand new buildings that cut asking prices - these are 1st sales and therefore the original price is a relatively abitrary 'ask' to discover where the market is. - if you want to have credibility in you assertion please demonstrate an example where 1 condo in a development resold for less then a similar condo in the same or nearby development.

And you are truly deluding yourself if you think that one class of housing (condos) will fall while another one rises (betcha cant ever find an example of this). In fact if condos fall appreciably not only will coops fall but so will brownstones - the best you can hope for is that your housing type will fall relatively less then others. Its all subsets of ONE market.

Posted by: guest at October 12, 2007 12:39 PM

Please take the time to read this story. There are BIG impairments to Mortgage Backed Securities.

If Banks have mark to price, we are in big trouble.

Folks, it's bad out there. Look at the stories in the MSM.

http://online.wsj.com/article/SB119214581308956665.html?mod=hpp_us_whats_news

The What

Someday this war is gonna end.........

Posted by: guest at October 12, 2007 1:36 PM

Interesting that so many of the posters think that coops will hold their value better than condos. In the downturn of 89-90 coops lost more value than condos and coop prices took longer to recover. Mortgages for coops were difficult obtain. Is there something different this time around that I am missing?

Posted by: guest at October 12, 2007 1:37 PM

"Co-op prices rose 32.3% to $557,000 during the quarter, while condo prices dropped 2.9% from $616,000 to $598,000."

Obviously none of you read the article.

Posted by: guest at October 12, 2007 1:52 PM

1:52 - the article is talking about "average prices", The statistics used are meaningless (think what 1 10M coop does to an average). Additionally there is no accounting for size differentials (clearly there are alot of new condos coming on the market and ZERO coops, so if 2/3 of the condos sold are 1BRms and 2/3 of the coops sold are 2 BRms what information can you gleen based on a comparison of average price? Answer=nothing.

Its simple all these housing types are subsets of the same market and their prices will all move relative to each other - irrelevant statistics not withstanding.

Posted by: guest at October 12, 2007 2:33 PM

I believe that the article is based on average prices and a small population (841 sales) so takes no account of changes to mix. One can infer that condo mix will change significantly based on building completion/target market/neighbourhood - for example earlier period may have included more 2 beds in new DUMBO buildings, later more 1 beds in Williamsburg buildings, etc... Co-ops and single family sales are more commonly re-sales and therefore mix is less choppy.

Posted by: guest at October 12, 2007 2:35 PM

The point is that condo prices DID drop and co=op prices DID rise dramatically in this period in these specific neighbrohoods.

If you are denying it means you own a condo and if you are supporting it you probably own a co-op.

But the numbers speak for themselves.

Posted by: guest at October 12, 2007 2:48 PM

Established coops (and almost all are now -- not like the massive conversions in the late 80s) require at least 20% down and adequate financials. Condos are asking 10% (some only 5%) and whatever can get you financing. If investors (and these new condos -- even 110 Livingston -- are full of them) cannot flip or rent to cover their nut, they can/will walk away. It's happened before. With investor units on the market, residents who need or want to sell are competing with desperate sellers (there have been articles for the past year about all the units for sale in the Trump UWS buidlings). This makes condos more vulnerable to a market downswing (which, I think, has just really started). Its under way in Miami (where everyone said they just don't make more beachfront property and all the foreigners want to but -- huh!), the rest of FL and Vegas.

Posted by: guest at October 12, 2007 3:01 PM

Unless new construction is built by:

1. A Starchitect or
2. By a no name architect who actually built something of significance

Prices will drop on condos as they begin to age. Once there is something newer and shinier on the market, your new brick clad condo circa 2006 is gonna be worth nothing more than the land it's sitting on.

That's the difference. Old buildings are unique. They are special They are what makes New York DIFFERENT than Kansas City. You don't see any home tours taking place on 4th Avenue in Park Slope.

These new condos are plywood and sheetrock.

Little else.

Posted by: guest at October 12, 2007 3:08 PM

3:01 - your citing of Las Vegas and Miami is beyond stupid - both of those markets have seen tremendous price declines in condos AND individual homes and neither market (or most of the rest of the country) has coop apartments. Additionally there is no evidence that "investors" or "flippers" are prevelant in the NYC market and certainly not near the levels seen in either of the cited markets.

Except 3:08 even if your uninformed nonsense regarding plywood and sheetrock was true - there wont be anymore land to build a "newer and shiner" condo on.

Again I ask you to cite ONE example (historical or current) where the prices of one housing class moved in the opposite direction from the prices of another housing class in the same market.

Posted by: guest at October 12, 2007 4:17 PM

i agree with one of the posters above. i think most of the original townhouse/brownstone stock in the newly desirable neighborhoods like ft greene and clinton hill have been bought up over the last 5 years. now it is either people trying to re-sell to make money, which isn't going to happen at the inflated prices, or you buy in a further expanded neighborhood like bed-stuy, crown heights, or wallabout- which IMHO is still a good idea with these interest rates and as long as the house fits the usual criteria- good bones, good detail, good block, and fair price per sq/ft. i think those of us that left the manhattan mall for brooklyn 5 years ago and bought houses in FG, CH, CG, etc are here to stay and most of that original inventory is taken. most houses, but of course not all, that are on the market now are people trying to make money and they are over-priced for the most part. so they either sit, or sellers decide to sit on them.

Posted by: guest at October 12, 2007 4:45 PM

Sorry to deflate the naysayer's bubble but I don't see the prices of brownstones falling much more. It's a stalemate betwween buyers who want a home and homeowners who can sit and wait if they feel like it. In the meantime the economy continues to do well with the "sub-prime" meltdown already factored into wall street. And don't tell me Wall Street doesn't have alot to do with prices in Manhattan and Brownstone Brooklyn. In addition, we are in the midst of a global boom. Yes indeed, despite what many naysayers may want to believe, the US markets are actually slow compared to foreign markets which are doing quite well thank you. So you have in effect a small negative bubble in NYC being encapsulated by a larger economic prosperity bubble that is the overall US economy and an even larger bubble that is the world economy. Sounds like the homeowners will win this round and the buyers should just look for the nicest and best home they can reasonably afford.

Posted by: guest at October 12, 2007 5:03 PM

i have never ever ever spoke to anyone who actually WANTED a coop. why on earth would you? you have to jump through a million hoops to get it, you can't rent it, you have to abide by its rules, etc... everyone i know who did buy one HAD to because it was all they could afford. also, they are damn noisy. you can hear everything above you, below you and next to you.

if you are rich and can afford a terrific renovated prestigious coop, sure, but if you have 700-1,300,000 wouldn't you rather have a ready to go totally new apartment? who has the time time to fool around with all those old apartments?

have friends that only had money for a coop in a prewar and they still haven't been able to renovate it 2 years later. it's a disaster. old kitchen/bath, no central A/C, no washer dryer.

also, most new condo buildings have really solid construction and terrific amenities. had my space inspected prior to closing and the inspector gave it very high marks.

Posted by: guest at October 12, 2007 5:18 PM

Condos are more likely to be bought as investment properties than Co-ops are, so this divergence between the two suggests to me that: (1) market for owner-occupied remains strong (2) the investors have left the dance

Posted by: guest at October 12, 2007 7:10 PM

Hey the Twat

It's called "marking to market," not "marking to price," you FUCKING IDIOT. You would know that if you had ever worked a day in finance or taken econ 101, which you definitely haven't.

Twat, you KNOW nothing, and you ARE nothing.

Well, you're a liar, a poseur and a broke-ass loser--I guess that's something.

Posted by: guest at October 12, 2007 9:04 PM

this study is really meaningless, though prices have clearly climbed in all but the trashier parts of Brooklyn.

Posted by: guest at October 12, 2007 9:57 PM

What's different this time (v. the last downturn) is that, back then, there were very few condos to be found in brownstone Brooklyn. So, you might happen upon one, but likely most of what you saw to buy was coops.

And when you found a condo then, it was often a new conversion of a brownstone, so the closing costs were multiples of what it cost to buy in a coop - yet it was physically and financially like living in a brownstone coop, with all the tedium of having to work on the board to maintain the building with your neighbors, with the added disadvantage that you couldn't take out a building-wide mortgage to create a reserve to cover some upgrades/repairs/expenses (as only coops can do that.)

Now, there are tons of condos out there. I don't know how that will effect a downturn (I'm not even convinced there will be much of a downturn.) But it isn't 1989 out there anymore - the available market is radically different.

Basically, I think people either like new or old construction - and tend to gravitate toward one or the other. And, while nobody likes a coop, some do like living in an owner-occupied building, rather than a building largely owned by investor/landlords. And some just hate the new construction - what it looks like, where most of it is being built (4th Ave., other major streets), and how it feels to live in it. Having done coop once, never again - I'm holding out for a house somewhere before I buy again.

Posted by: guest at October 12, 2007 10:39 PM

logging in on greenpoint, U.S. of A.

salient points: 1.

greenpoint is divided. polish have a stranglehold on the area close to winthrop park (mcGolrick for all you newcomers). franklin street area is different, and has been up for grabs for about 5 years.

the gold rush didn't even begin until the city rezoned the area. when that happened, prices skyrocketed. before that, only williamsburg property was golden.

now, franklin street area is worth a fortune; why not? there's big things a'brewin' over that way.

over by mcGolrick, in the bosom of the oil spill, things are different. who wants to live in a sewage plant/oil spill? not the yups.

the poles, that's who. they've been here for a long time, they sell, almost exclusively, to one another, (look it up), and a 2 family frame will cost you more than a million.

it is not close to a subway, and the guy who sits in the corner of the palace bar will surely sick the pole mafia on you if you try to open a bar round these parts.

in my considered opinion, this part of greenpoint is not going to change. the poles want to keep it to and for themselves, and nobody else wants to live on the sewage treatment/oil spill land.

it will never be fabulous.

thank you, saint hedwig queen of poland.

thanks for the sewage, the oil spill, the rosebushes, and the ham.

Posted by: guest at October 13, 2007 1:04 AM

With the low number sample number and lack of price per square foot, the study cannot possibly say there was a statistically significant drop in condo prices. Not saying that there was not an actual drop but this study seems fundamentally flawed. Also, it doesn't make sense. People want condos much more than coops and condos generally are worth 25-30 percent more per foot.

Posted by: guest at October 13, 2007 9:52 AM

Brownstoner,
How about deleting posts such as 9:04, above?
Just awful to have to read such vocab! A little profanity, well placed, may sometimes be important part of self-expression. But that post is too much!

Posted by: guest at October 15, 2007 2:14 PM