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October 9, 2008

Average Prices Up in BK, Inventory Down

trulia_1008.jpg
Looks like the law of supply and demand is at work in Brooklyn. According to a market trend report from Trulia, the average listing price of Brooklyn homes rose 1.4% between September 24 and October 1, from $691,857 to $701,779. The number of listings, however, went down from about 4,725 to about 4,625. Think folks are holding off releasing units until the credit crisis wanes? We thought prices were starting to come down...




Posted by lisa at 10:46 AM | Comments (28)
Categories: Market

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It's the usual problem with "averages." The supply is reduced, but it doesn't point out which segment of the supply. The high-end luxury units are probably at about the same level (the sellers are making a huge profit on those at any price-point), but the "lower priced" units may have been pulled from the market.

The absolute number of "# of units" vs. the relative number of "average price" may belie the truth of the ye olde supply and demand.

Posted by: tybur6 at October 9, 2008 11:02 AM

yeah, if the edge of one prospect park puts a bunch of new upper-floor units on the market, the average goes up. it's apples and oranges.

Posted by: itsagas at October 9, 2008 11:05 AM

A few points:

1) Listing prices are not nearly as meaningful as closing prices so to really determine market direction, we should look at closing prices. For all we know, the sellers represented in this sample listed even higher since they were factoring in that buyers would want a steeper discount off of the ask.

2) As this blog has shown, closing prices are coming down on lots of properties, and in many cases, asking prices are being cut too to "move the merch".

3) Yes, I think many people, buyers and sellers, are watching the financial crisis and figuring out how to respond, so for sellers, that may mean holding off on putting properties on the market (though if they are waiting to "turn the page" on this crisis a la McCain, they may have a long wait).

4) It's true that low inventory has been Brooklyn's saving grace thus far, and has prevented prices from collapsing. As long as inventory stays low, prices may remain at pretty high levels, though there is pretty universal consensus that given what's going on in the economy and Wall Street, NYC real estate will take some kind of a hit - the only unknowns are how big, how long, and when that hit will be.

5) The financial sh*t only truly hit the fan a few weeks ago, and it's possible that these kinds of graphs/studies will look very different starting in Oct/Nov of this year...

Posted by: Miss Muffett at October 9, 2008 11:08 AM

In other words... If supply is restricted, ceteris paribus, then the price will rise.

There is no such thing as Ceteris Paribus in the NYC housing market... the best things we have is breaking up the market into tiny microcosms of "comps" in a given tiny 4-block radius... actually 4-blocks might be too large.

The only thing equal in NYC housing is that ALL prices are unsustainably high and will come down. The high-luxury places, of course, less so. The prices for luxury goods and services are very "elastic." It's all basic microeconomics.

Posted by: tybur6 at October 9, 2008 11:10 AM

"We thought prices were starting to come down..."

You thought right. Don't fall for the spin.

Posted by: DOW8000SP800 at October 9, 2008 11:13 AM

miss muffett, this time i agree with you. :) while the trulia data is mildly interesting, at the end of the day the only way to measure the market is to look at the most current closing prices.

Posted by: z at October 9, 2008 11:33 AM

in our little brownstone world, there is some protection due to the very restricted supply of renovated homes in "prime" areas and the consistent high demand for same. as the fallout from the crisis extends, this supply will loosen and demand will fall, but it's hard to say by how much. i think the real drop, if it happens, will be if prices on large condos drop so significantly that people who previously were in the brownstone market exclusively will start seeing condos as substitutes.

don't all the major brokers come out with quarterly reports on the market? it will be interesting to see what they say about the brooklyn brownstone market. or maybe someone with a lot of time on his hands can do an independent survey of recent closing prices.

Posted by: i disagree at October 9, 2008 11:45 AM

these guys can say whatever they want.
anyone who is willing to pay the same amount for the same brownstone today as they would have before the financial crisis ought to have their head examined.
and anyone sticking to the same asking price doesn't really want to sell their house

Posted by: ontheparkway at October 9, 2008 11:49 AM

Asking prices are currently irrelevant.

As I have pointed out many times, the top of any asset bubble is typically characterized by decreasing supply and barely increasing prices. Prices start to decline, and some sellers hold out thinking things will get better. They don't. Prices decrease some more, and the weakest sellers give in. Inventory increases, sales volume increases and prices decrease. The cycle continues until everyone who thought that holding out was a good idea kicks themselves for not selling at a mere 15% discount when they had the chance. Sellers capitulate. The market bottoms.

This will take several years to happen here. If anyone wants to start reading the posts that the sebbs of the world will be posting over the various stages of price declines, I can pretty much cut and paste from any other bubble collapses over the years. Every bubble is different in some way, but the psychology is always the same. The process is painfully predictable.

Posted by: lechacal at October 9, 2008 12:13 PM

I hope it happens as you say lechacal. My recent experience in my home search is just as the article said. Many people have not come down on price and houses are few and far between. And I'm not looking in a "prime" area,

Posted by: Susan Elkins at October 9, 2008 1:16 PM

I suspect we're in for a protracted stand-off between buyers and sellers, since, as lechacal points out, many sellers will refuse to capitulate, but most buyers will also refuse to (or be unable to) pay the current sky-high prices. But yes, the weaker sellers will start to cave and that will re-set comps - it's already staring to happen. People I know who are divorcing, for example, are indeed being forced to sell at a steep discount. I also wonder how many near-retirees will realize that selling their house now could be the one way they can get their nest egg back in order, at a time when they can snap up another property in another market (even just outside of NYC) for a very deep discount.

Posted by: Miss Muffett at October 9, 2008 1:23 PM

What is happening right now is no different from what was happening in other U.S. markets starting in 2005. New York is three years late for various reasons. Buyers and sellers were in a standoff nationally for a while as well.

Just remember this: Resist the first five or six urges to "jump on a deal before the market turns around." Don't buy until everyone is exhausted with the declining market. You will be rewarded for your patience. There will be false starts to a turnaround, the first of which will be when the equity markets recover. The sebbs of the world will say that the stock market is up, so better buy right now. They will be wrong. People will slowly realize that the recovery in the stock market has very little to do with the price of real estate in Brooklyn and the market will go back into decline. Then there will be another false start in the New York market when the national housing market turns around. Don't buy. Keep waiting. When New York prices keep going down even after the stock market and national market have recovered, sellers will finally capitulate. That won't happen for at least another two years, maybe more. Your patience will be rewarded.

Posted by: lechacal at October 9, 2008 1:40 PM

The graph may also reflect that houses worth less are not going on the market and the higher end prices are. What is the median price?

Posted by: Iknow at October 9, 2008 1:44 PM

Many people still saving hope that le cheval is correct.

Posted by: dittoburg at October 9, 2008 1:53 PM

"Iknow" - that's what I said at the top... just sayin.

Posted by: tybur6 at October 9, 2008 1:54 PM

This article is about 1 week's worth of data. That doesn't seem like enough to draw conclusions from.

Posted by: ari at October 9, 2008 1:58 PM

2 years! I'm afraid I don't have that kind of patience, and my landlord may not have that many years left either. I don't dispute your theory, and greatly appreciate your insight, but when I see a house that I like at a fair price, I'm buying it. Then I suppose another kind of patience will have to kick in, that is, I won't be able to sell for 10 years. But that's ok, since that's the plan.

Posted by: Susan Elkins at October 9, 2008 1:59 PM

lechacal at October 9, 2008 1:40 PM = QOMD

Posted by: DOW8000SP800 at October 9, 2008 2:14 PM

Prices in Prime Brooklyn will not go down. Sellers will allow 10% below ask in BH, PS, CG, CH, FG but that's about it. Moreover, others like myself will not sell in this environment, but, rather wait out the storm, thereby greatly reducing inventory. There's nothing new being built, unlike Manhattan, I don't see miles upon miles of high rises ino ur future. Those 4th Ave condos are already turning rental which is to be expected, further reducing inventory. Blokes from Manhattan will move to Brooklyn as will retirees from LI and Westchester. We're all good in this neck of the woods. Fo' real.

Posted by: PropJoe at October 9, 2008 2:19 PM

QOMD?
quote of my day?

Posted by: dittoburg at October 9, 2008 2:19 PM

If I had to rely on divorces and retirements to occur to have a house I want become available, I'd be depressed. We did our house search when there were plenty houses on the market and still it was so hard to find one we loved. The house (not condo) inventory is going to be much smaller than it was 2 or more years ago. There's no way it won't with what's going on.

Posted by: traditionalmod at October 9, 2008 2:20 PM

Average price residential stats are interesting but less valuable than unit volume. Compare #s of closings in trend lines......Values are off, period.

'there are three kinds of lies; lies, damned lies and statistics' benjamin disraeli

Posted by: BK realestate veteran at October 9, 2008 2:23 PM

http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=1353683

In contract for $2.2mm. Ask was $2.25mm That's almost $1400 per sq foot 15 minutes from Boro Hall subway. Enuff said.

Brooklyn ain't falling friends.

Posted by: PropJoe at October 9, 2008 2:23 PM

Lechacal--while I appreciate the wisdom of your advice I am also sympathetic to what Susan Elkins is saying. For some people being patient fits their life trajectories and for some it does not. Waiting 2-4 years to buy would have put me in a very uncomfortable spot in my old apartment with too many people for too little space. So I did as Susan says she is going to--namely buy something that fits from a personal/aesthetic standpoint and price standpoint. For people who are childless or have flexibility for other reasons your advice is no doubt sage.

Posted by: wasder at October 9, 2008 2:29 PM

"QOMD?
quote of my day?"

Yeah.

Posted by: DOW8000SP800 at October 9, 2008 3:05 PM

Lots of comments saying, "the prices aren't falling very much" and then more comments saying, "the inventory is painfully low."

No one seems to see the connection.

In a high-priced market such as "premium brooklyn," shouldn't the restricted volume cause prices to go up? All that is happening is that the prices aren't softening that much... hardly a strong position. Just imagine how low prices would be if the inventory was increase, say 20%.

A few fun things are going to (re-)emerge in this tightening marketplace... there will be fewer real estate agents (Horray!) and the professional ones, that is to say the non-desperate ones, won't waste their time with sellers who aren't serious... and the overinflated Corcoran-style price tags will become closer to reality -- asking = selling

Oh - and you will actually have to have a decent product to sell in this new buyers' market. If the quality doesn't match the price tag, forget it.

Imagine!

Posted by: tybur6 at October 9, 2008 4:02 PM

"Blokes from Manhattan will move to Brooklyn"

Why? Prices in Manhattan are already falling.

Posted by: SnarkSlope at October 9, 2008 6:17 PM

I agree with Susan Elkins that I'm not going to wait for the bottom - if we see something we like at a fair price we can afford, we will buy. But sellers do need to realize that if they price as if there is no crisis, then their properties will not move. People always need to sell, and not just due to divorce/retirement (those were just a few examples of reasons to sell) so while inventory may remain low, there will be houses coming to market and prices will come down. Maybe not the kind of crash we're currently seeing in the stock market, but I think folks like PropJoe and sebb are in a state of denial to think it can't happen - historically, it has before and it can certainly happen again.

Posted by: Miss Muffett at October 9, 2008 9:23 PM

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