Since 2012, we’ve watched home prices in Brooklyn climb ever higher. Interest rates have stayed low, while real estate has returned gains of 8 percent or, in some cases, 100 percent a year, making real estate an enticing investment — not only in Brooklyn but nationwide and even globally.
You may remember Dixon, the Australian market-backed REIT (real estate investment trust), which has been snapping up townhouses in Brooklyn at record prices, renovating them, and renting them out? They are not alone: Blackstone and others from the small to the large have been doing the same thing across the U.S. and globally, fueled by private equity, venture capital and stock markets, The New York Times reports.
Investors have bought millions of U.S. homes since the 2008 subprime mortgage crisis. Last year, investors scooped up one-fifth of homes in the bottom third of the market, according to the paper.
Not to be left out of the party piggybacking on abundant capital, high demand for rentals, and soaring real estate values are flippers, developers and so-called real-estate tech companies. The latter encompass a wide variety of startups and others seeking to “disrupt” the existing real estate industry with data and algorithms (the same technology that brings us YouTube recommended videos).
Zillow, for example, is no longer just a listings marketplace but a programmatic, algorithmic, high-tech real estate brokerage and flipper that buys, renovates, and sells, a report in The Wall Street Journal lays out.
AirBnB is part of the story too, as some people buy and renovate houses to rent out units on AirBnB.
Locally, prices are softening, there is a glut of luxury rentals and, in Brooklyn, we are seeing a bevy of townhouses on the market this season. These are not the broken fire-sale properties of the 2008 subprime mortgage crisis, but a mix of flipped and beautifully renovated and restored brownstones and row houses.
On the development front, Brooklyn stalwarts Brookland Capital and Hello Living! have had some glitches with their investors and are no longer building in Brooklyn. In Park Slope not far from the expressway, two properties developed by Adam America, Slate Property Group and others as luxury rentals, 535 4th Avenue and 555 4th Avenue, will be rented out by the city for approximately $9,000 to $10,500 a month per apartment and turned into shelters for homeless families, according to Bklyner.
With never-ending demand, in the last down cycle, Brooklyn was resilient but not immune to the larger forces affecting the economy and the real estate market. Is there potential for the rental business to become the next subprime mortgage crisis?
What do you think is next for the real estate market and the economy?
[Photos by Susan De Vries]
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