Has the Buyers' Market Come to Brooklyn? Duh.

I agree that this report does not reflect the depth of the potential declines to come, given the rapid deterioration of the economy since this report data was gathered. As for PS going down, I don't think this is surprising at all, given how rapidly and astronomically it shot up. While many potential sellers may panic at this prospect, I'm not quite sure why unless they unwisely used their home as an ATM, or bought with an intention to flip fast. The vast majority of owners who have owned for more than 3-5 years should do fine. Just in this short period (since 2003) prices skyrocketed, so for them to plummet back down to the same levels they were at just a few years ago would leave many owners in the same place they were in a few years ago, but make property more affordable for new, 1st time buyers.

Posted by: Miss Muffett at November 12, 2008 11:25 AM

Montrose - I think your idea of requiring some preparation on the part of first time home-buyers is a great idea. I sure could have used this the first time I bought, and was lucky to have close family members, and my husband, who had much more experience buying real estate - but it can be complex. Sorting through the decisions of what kind of mortgage to get, the benefits of points vs. no points, understanding/budgeting closing costs, etc are all significant financial decisions that can be overwhelming for the 1st time buyer, especially when purchasing real estate can already be so emotionally daunting. That said, I think Brooklyn brownstones are not immune from foreclosure. I've seen some homes recently in prime areas being sold by owners who suddenly find themselves unable to pay their mortgage due to job loss, change in financial circumstances etc. The people who will suffer most in this downturn are those who stretched in the last 5 years and paid astronomical prices they can no longer afford and must sell at a loss - unlike the long-term owners (or even owners who bought longer than 5 years ago) who should do fine.

Posted by: Miss Muffett at November 12, 2008 11:31 AM

THAL - what's with the name calling? You have to remember that for many first time buyers, the last 5 years or so have been painful. All these people with respectable jobs, and hard-won savings for a downpayment, being looked at by realtors as if they were paupers because the budgets they had (which in any other part of the country would be considered astronomical) were deemed chump change in NYC. I can tell you from personal experience that it's very frustrating to feel like you've worked hard, you've scrimped and saved for the biggest investment of your life, one of the most important one you can make for your family - and you're not given the time of day by realtors because your budget just does not cut it. For some of these buyers to now feel signs of excitement and hope that prices will become affordable does not make them losers. I know the pain of the economy will hurt many people, and those who will suffer deserve genuine sympathy, but what's often forgotten in this equation is that the pain of the bubble - creating a crisis of affordable housing - hurt a lot of people too.

Posted by: Miss Muffett at November 12, 2008 11:38 AM

Z - I think both things happened. That is, some people with modest incomes stretched to buy properties they couldn't afford (and also, some people with handsome incomes stretched, took on huge mortgages and are now losing their jobs). Others did not buy. Yes, there are tons of other neighborhoods, and while obviously, everyone is not entitled to a 4-story brownstone with detail in Park Slope (for example), I don't think it's wrong for a first time buyer to aspire to live in PS period or other "prime" neighborhoods (and arguably, even the fringes of the prime hoods, which are hardly prime i.e. 14th st bet 4/5 Ave, shot up unbelievably of late as per recent HOTD that sold for close to 2 million). We all make our individual choices/trade-offs re: budget/space/neighborhood (and all that entails in terms of commute/schools/amenities/community etc.). But I do think the bubble years altered things beyond the norm of NYC being expensive overall. I speak as someone, mind you, who benefited from the bubble years, and was able to buy in prime Brooklyn before things got totally insane, but it saddened me to see, for example, so many families at my son's school priced out - these are people who've rented for many years and become very invested in the community, had worked hard and saved, and saw property values shoot up so fast they were priced out. Yes, they could move and buy elsewhere, far away, but that would mean deracinating themselves from a community/school/friends who they'd become very close to in all the years they'd rented. I hope some of these folks can now have a shot at home ownership - perhaps not in the exact location they want to be in, but not so far away that they have to totally uproot their lives.

Posted by: Miss Muffett at November 12, 2008 12:10 PM

THAL - if you love your place, can afford it, and plan to stay for a pretty long time, you'll be fine. I'm glad you got a deal. As to what will happen in prime Brooklyn, no one knows. Did anyone expect the stock market to tank as far as it has? No one has a crystal ball. What we do know is that prices have more than doubled in the last 5 years in some of the prime areas and the writing has been on the wall for some time that this was unsustainable. Again, I don't think it's wrong for a 1st time buyer to look forward to price declines - doing so does not make them a monster that wants "people wiped out". Hopefully, most buyers, like you, will experience paper losses only. But let's face it - in every market, there are winners and losers and for years, owners have been the winners. For years, owners have been very excited about this. Now, it's the buyers who are getting excited. Human nature.

Posted by: Miss Muffett at November 12, 2008 12:33 PM

fsrg makes a great point - why would a 50% be so improbable given the rise by over 100% in 5 years?

Posted by: Miss Muffett at November 12, 2008 12:43 PM

Economics is very complex. Some (Soros) argue that we have lived through a long-standing mega-bubble in many asset classes. What is happening now, the unwinding of that bubble, is unprecedented. We can all argue til we're blue in the face but no one knows the definitive answer. The only thing we all agree on is that prices WILL go down, even in prime areas. 50% does not seem out of the question, and 25% seems modest. But really, how far prices will decline, and for how long, is anyone's guess. Barring some future catastrophe, I too think that, eventually, NYC prices will go back up, but there are so many other things that might change that too - alternative energy, for example and better public transport that will make suburban commutes more attractive. Anyway, there's no question we're heading for a prolonged buyers market where prices will drop a lot and for a while and we'll just have to wait to see what else the future brings.

Posted by: Miss Muffett at November 12, 2008 1:32 PM

Agree with lechacal. Sebb, as usual, is grasping at straws since he can't bear the reality of what is happening. Prices will go down more than "modestly" - just wait.

Posted by: Miss Muffett at November 12, 2008 2:46 PM

Aussie - not sure why you think I lack empathy, unless it's because I don't seem to have a lot of sympathy for owners who bought properties for a song and now may complain that they are only reaping 1 million in profit, instead of 1.5 (or 500K, instead of 1million, etc.? As I've said repeatedly, I *DO* empathize with those people who stretched in the last few years and now can't afford their mortgages, and will possibly have to sell at a loss in the future. I sincerely hope this does not happen to a lot of people. But I also think there are many owners for whom a downturn will mean a smaller profit, not being "underwater" by any stretch, given the unbelievable price appreciation of the last decade, and especially the last 5 years. One thing I find very puzzling on an anonymous blog is how other anonymous people make personality judgments when so little is known about any of the people who post on here. None of us can possibly really know very much about others - and I'm sure we all have our share of good luck and bad, empathy and selfish motives etc. Please, let's keep the personal attacks at bay and stick to real estate.

Posted by: Miss Muffett at November 12, 2008 9:02 PM

Aussie - a quick P.S. - today's HOTD on Lincoln Place is on the market for over 2.5 (almost 2.6)., and last traded, just 4 years ago for about half of that, 1.3+mil. So, would I feel sorry for the seller if, say, this house sold for 1.8-2mil? Probably not. Sure, they may have spent money on renovation, but I highly doubt they spent more than 500-600K. If they walk away with "only" 100-200K in profits, or, if the worst case scenario for them is that they break even, is that really so bad?

Posted by: Miss Muffett at November 12, 2008 10:32 PM