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October 3, 2008

Third Quarter Report: Foreclosures Down in Brooklyn

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Our foreclosure rate here in Brooklyn dropped one whole percentage point this quarter, according to the Q3 reports from Property Shark. Staten Island and Queens are both hurting, with a 44% and 19% increase respectively; one in every 952 SI homes was in foreclosure. Manhattan's in the best shape, apparently, with an 8% decrease. The top zip code for lis pendens, however, was 11208, which encompasses East New York, New Lots, City Line and Starrett City.




Posted by lisa at 9:03 AM | Comments (21)
Categories: Foreclosure

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This is what I am talking about. This is not Miami with 40,000 foreclosures. You People that are screaming that prices will drop big time need to do your Homework.

Posted by: sebb at October 3, 2008 9:22 AM

Not only that, the foreclosures in Brooklyn are concentrated in areas that most of you have probably never set foot in. That doesn't mean prices aren't going to take a hit everywhere, but that doesn't mean there's going to be urban blight on South Portland avnue.

Posted by: itsagas at October 3, 2008 9:48 AM

Brokers predict that real estate prices are unlikely to drop as much as they have in other parts of the nation because the market is filled with co-op owners who have more equity in their properties and because there is a limited supply of apartments in New York City.

“You will start to see a softening in prices over the next two quarters, but it’s not going to be dramatic,” said Pamela Liebman, chief executive of the Corcoran Group. “The predictions of a full-scale drop in New York will not happen.”

Posted by: sebb at October 3, 2008 9:51 AM

Foreclosures are an extremely trailing indicator.

Remember, the downturn in Miami and Phoenix started over 3 years ago, and only in the last year have the foreclosure statistics really spiked. The downturn in NYC and Brooklyn really started this year, so you wont see the foreclosure effect until another year to two. Maybe wall street will pull out by then and we'll be booming, but if not, as prices continue to drop around the city, the banks will start to reposses some of the homes that they own, and you will see a change in foreclosure statistics.

Posted by: LOL at October 3, 2008 10:03 AM

If even Corcoran is admitting that prices are going down, I think we can postulate that they are going to go WAY down.

Posted by: SnarkSlope at October 3, 2008 10:18 AM

Prices are not going anywhere.Maybe 10 to 15% down nothing more.

Posted by: sebb at October 3, 2008 10:36 AM

There is a good reason that foreclosures haven't yet hit a tipping point in Brooklyn and that's simply because the price of real estate hasn't dived yet. We are on the start of a decline, and that decline will start to accelerate which will fuel foreclosures.

in 2005 when SISA loans and NINA loans were being converted into CDOs, many people in the business were surprised that they were actually paying dividends even though the basis of the CDOs were "toxic waste" - and the reason for this was increasing hose prices. People could take out a home equity loan to make monthly payments. In this market, home equity loans are much harder to come by, couple that with the start of a decline in house prices and we're at the start of a wild ride.

Real estate in Brooklyn (and Manhattan) is over valued by about 40-50%

Just wait and see.

Posted by: tippingpoint at October 3, 2008 10:43 AM

regarding my previous post, the price of hoses may bum me out when I need a replacement to water my garden, but have little to do with real estate. please substitute 'hoses' with 'houses'.

Posted by: tippingpoint at October 3, 2008 10:46 AM

You might want to clap a little louder, sebb. Tinkerbell is looking a little pale and woozy.

Posted by: SnarkSlope at October 3, 2008 10:58 AM

I'm a big believer in down more than 15%, but down less than 30%.

Posted by: Paluka at October 3, 2008 11:05 AM

tippingpoint: Just wondering on what data do you base the '40-50% overvalued' notion?
Yes, a lot of junky loans were made in the last 7-8 years, but please let everyone know how many of these have been issued in brownstone Brooklyn. I think most co-ops require proof of past income so that buyers should be able to make monthly payments without resorting to drawing down on a heloc.
As for single-family home buyers, I don't think this area is dominated by flippers & speculative developers the way South Florida, Vegas and So Cal have been of-late. Those are the people most at-risk from dropping prices.
And although it may seem like 'tons' of new condos have gone up across Brooklyn, the numbers are relatively tiny compared to somewhere like Miami [and are almost entirely concentrated in 'emerging' neighborhoods which lack prime amenities & transportation]. Time will tell, but the condo boom of recent years is nothing compared to the late 80s [see today's NYT] & many developers will likely rent out unsold units rather than accept low-ball offers - at least below their profit goals.

Posted by: parkedslope at October 3, 2008 11:41 AM

I agree with itsagas
Most of the homes effected are in really bad area's. Other area's in brooklyn (sheepshead, bay ridge..) will probably see a small decline in value but will bounce back up in a year or so.

Brownstone brooklyn will not get effected at all!

If you put a democrate in office you will see a marked inflation which will stagnate the market for at least 5 years.

.........after which annual incomes will increase to meet the increased cost of living which in turn stimulate the real estate market.

5 years from now the market will be very different.

Posted by: landlord at October 3, 2008 11:55 AM

So, real estate is collapsing everywhere else in the planet, but brownstone Brooklyn will emerge unscathed?

This sort of "thinking" is what causes asset bubbles in the first place.

Posted by: SnarkSlope at October 3, 2008 12:03 PM

The 40-50% reduction relate to the fundamentals of the economy and the relative price of real estate to other goods (including rent) - You must also realize that the large increase of cheap money pushed up prices of a lot of things, but contrary to cheap money in the early 90s (look at the stock market indexes) most of this cheap money went into housing. The problem gets much worse when loans can't be repaid because of the multiplier effect of money in the economy.

I agree that people didn't but a $4mm Brownstone in Park Slope using a NINA loan, but prices are relative to each other: i.e. the bottom pushes the top higher and prices are relative. Without runaway inflation of other goods including income (as they relate to housing) we're going to see a drastic decrease in price.

Not all prices will go down by 50%, some prices are only out of equilibrium by about 25% - but flipping through the realtors websites, there are plenty that are 100% over valued (i.e. 50% reduction) simply to be afforded by people's incomes when there isn't cheap money.

Posted by: tippingpoint at October 3, 2008 12:07 PM

Employers cut 159,000 jobs in September, more than twice as many as in August or July, the Labor Department reported. It was the biggest monthly decline since 2003, when the economy was still losing jobs in the wake of the 2001 recession.

keep denying the way you were back in June when you thought NY would hold up.

Posted by: Dora Chica at October 3, 2008 12:31 PM

tippingpoint: I understand what you mean about the fundamentals of the economy, but I think a distinction needs to be made between parts of the country in which a large % of the housing built was speculative and parts in which are dominated by owner-occupied, primary residences. Brownstone brooklyn falls squarely into the later category.
And yes, downward pressure on the top-end will affect the middle and bottom as well - but again, it's a matter of making distinctions within the market. Places like 15 CPW and other Manhattan trophy condos have seen amazing price inflation, and they may indeed see a huge price deflation. But %-wise, your average 2 BR Brooklyn co-op in an established neighborhood hasn't seen the same kind of insane price gains over the last 5 years. So my bet is this type of property will also see the least decline [based on relative scarcity, co-op oversight, and wide-ranging appeal to singles, couples, small families].
Finally, again, I agree that there are many overpriced brownstones on the market. It's amazing to see places listed at 3x their 2005 value after only minor facelifts... but the real #'s to look at are sale prices, not asking prices. Speculators might lose-out big time, but my hunch is that the price drops in the prime neighborhoods will be blunted by a large % of people simply staying-put & weathering the storm [assuming it doesn't go longer than 2-3 years].

Posted by: parkedslope at October 3, 2008 1:01 PM

Tipping Point - you're making sense. I'm not a hysteric naysayer, and I appreciate that Miami is in worse shape than the rest of the country, but things in New York just aren't looking that good. For those of us in finance the bonus outlook is really poor - assuming we can hold onto our jobs. People can't stay put paying over $8,000 in mortgages if they have no job, no prospect of pay increases, or a drastic pay cut. Prices will fall relative to the pool of available buyers, their ability to get credit, and the sense of urgency current home owners have to sell. We shall see, but I would not read too much into a 1% decline in existing foreclosures - the bigger measure is the number of people who won't be able to get into this market anytime soon.

Posted by: HellsBelles at October 3, 2008 1:31 PM

The truth will lie somewhere in between the hyperbole.
-the bailout bill has been passed, for good or bad, that means that the banks will take the risky mortgages off the books.
-those mortgages will be refinanced, foreclosed and sold or simply paid.
-business will continue mainly because that's what people do, we work and build and procreate and generally grow.
-sure there may be an economic downturn but talk of a new depression seems silly when we understand the difference between 1929 and 2008 in terms of underlying social structure, economic forces and technological advancements.
-housing in Brooklyn and New York in general will not tank because in tougher economic times the trend is towards the city where easy commuting, more jobs and more business opportunity are to be found. The problem in the 1970's was decades of erosion and manufacturing base decay.
-buying opportunities will abound, after all, it's not like there aren't talented, hardworking and intelligent people out there with good credit or some savings to invest in a new home. Most people still want their own homes as far as I can tell.

Posted by: Legion at October 3, 2008 6:30 PM

Oh for heaven's sake. Prices in marginal Brooklyn neighborhoods for whole houses have already dropped 20 percent. (I know, I live in one.) Foreclosures and short sales are dramatically up (in these areas). Reasons: Health care problems, job loss, refinancing with balloon mortgages, and buying with balloon mortgages. That's the supply side.
On the demand side, the pool of qualified buyers shrunk significantly in the spring and summer when you could no longer get a loan with less than 10 percent down and good credit. In the last week, it appears you can only get a loan with 20 percent down and credit over 750. Right now, good houses are being snapped up at fire sale prices by qualified buyers. Places in poor condition languish on the market. Those are the facts! Going forward, if there are significant job cuts, European economy gets worse, interest rates go up, lending stays tight -- prices will keep dropping. Or maybe the Chinese will swoop in and buy their Classic 6 pied-a-terres. Before the U.S. defaults on all its credit, I mean. Where is The What, by the way? Shouldn't he be on here crowing he was right?

Posted by: mopar at October 5, 2008 11:53 AM

uhh, did you miss the headline mopar?
Brooklyn foreclosures down.
I know you are pining away for the local assclown, but the truth is we are far from an, I Am Legend, scenario as he was prone to whine about.
As I stated, the truth usually lies somewhere between the hyperbole.
You are letting your liberal pessimism get the best of you. in fact one might argue that with 50 million or so angry and motivated liberals, there will be no "good economy" until their candidate is in office.
Call me when the brownstones in fort greene hit 200k.lol.

Posted by: Legion at October 5, 2008 7:00 PM

Legion,
If Mopar calls to let you know the houses are going for 200K in FG, please let me know! Maybe Nokilissa will finally be able to settle on a house at that point.

Posted by: BrooklynGreene at October 6, 2008 7:35 PM

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