Brownstone Market: Trouble on the Fringes?
This month’s issue of The Real Deal has an article about the ramifications of a cooling real estate market in Brooklyn (despite the debatability of that assertion). TRD contends that the more “farflung” nabes are the most vulnerable, pointing not only to some price reductions in spots like Bed Stuy as well as signs of…
This month’s issue of The Real Deal has an article about the ramifications of a cooling real estate market in Brooklyn (despite the debatability of that assertion). TRD contends that the more “farflung” nabes are the most vulnerable, pointing not only to some price reductions in spots like Bed Stuy as well as signs of mortgage lenders becoming more stringent about appraisals and comps. One Brown Harris Stevens broker claims that houses in Bed Stuy that may have been selling for for around $800,000 a few months ago now have asking prices closer to $600,000. Maybe, but frankly we haven’t seen many examples of such a dramatic shift. Sure people are being more deliberate in the search and may be less likely to plunk down a million bucks for a wreck in a less proven area, but 25% decreases are the exception not the rule as far as we’re aware.
Doubts on Fringe of B’kln [The Real Deal]
David, if you want to talk history, 4 years ago, in the wake of 9-11, the word on the streets was “wait it out, there’s going to be a lot of foreclosure within the next year or two, prices will drop”. The opposite happened, property values tripled and quadrupled.
If you, like me, wasn’t born wealthy then it’s hard to fathom where all this money that is driving this market is coming from. But it’s out there, and the market is shifting from speculative investors to buyers who’ve resigned themselves to plunking down the majority of their assets into their homes.
I’m not denying that psychology isn’t a major factor. But psychology is also a major factor in the stock market, which still remains volatile.
Prices will stabilize evetually but I don’t see the drastic plummeting of values, circa 1989, that many people are predicting. I think what we’re experiencing is a radical shift in the evolution of home prices. As much as I would like to own a brownstone, I don’t think we’ll ever go back to the turn of the century home-prices.
Anonymous… I have been in Fort Greene long enough to doubt that the area is going to become the uber-exclusive community you refer to. If you can buy an entire brownstone for 1.3 million on the same block you bought a piece of a building for 900K…it’s easy to see you are not making a smart investment. I have friends who paid the price for this and are now “stuck”
with it because they can’t sell and break even never mind making a profit.
Stacey, chances are you’re a long-time resident (i.e. pre-real estate frenzy).
It’s all relative.
I don’t consider them ‘had’. Money begets money. That 700-900K condo will be worth a lot more years from now as the neighborhood evolves into an uber-exclusive community. They’re laughing at you as much as you’re laughing at them.
It’s easy to under-value amd take for granted what you’ve grown accustomed to (property included).
Anon – I have no distain for the neighborhoods you mention, nor is my point limited to these markets
As for the prices of Studios in Manhattan – They will fall as well… and it is exactly your comparison between a studio in NYC and the stock market that proves my point about psychology – supply and demand when it comes to housing typically revolves around people needing a place to live – once you make it an investment (like equities) a different psychology enters into it. Remember ’99 when everyone thought Tech stocks couldnt fall to far b/c Tech is the future
Sure $ is flowing in from people who want a pied-a-terre etc… but that is not a new phenomenon (causing 100% price appreciation) and if anything these ‘optional’ purchases are the ones most suseptible to psychology – a 2nd home in the city is great when prices are appreciating at 30% a year – but those carry charges are alot heavier when the price is flat or falling.
As for rent – it virtually every part of the city, it is much more affordable to rent then own (even including for interest and tax depreciation) and rents would have to increase a huge % (which they have not) to chage that equation.
For full disclosure I am in RE biz and a homeowner, and in many ways I would do much better if prices kept increasing – but that doesnt change reality –
Amy, I’d gladly be part of any kind of tour for newcomers.
To the person who said that renters in Bed Stuy were hard to come by – huh? All kinds of people would come up to me if I even put out several large bags of garbage to ask if there was an apartment available. I see ads in the Times, as well as Daily News all the time, and I know many renters, and would be renters. My friend who owns several prime block houses and is herself a realtor, has no trouble finding qualified renters of all bacgrounds and ages. Trying to sell a house in the more run down and less desirable areas of Bed Stuy would be a challenge in any market. But the primo blocks both in and out of the Stuy Heights historical district are not going to see a decrease in price. If anything, they will continue to rise, at least until buyers say “enough”, which they need to say in all markets in the city.
Reading these comments, I have to say that I think Bed-Stuy is overpriced in the sense that I really believe everything everywhere is inflated now and due for a correction. Bed-Stuy is an actual community that will survive the rise and fall of yuppie interest in it, just as it survived decades of neglect and abuse by the city.
The best way to protect yourself is to buy in a nabe you really like and feel comfortable in, where you are satisfied (even if not thrilled) with the services, because then you can ride out any downturns. You have to pay for a roof over your head somewhere. If you spent a lot of scratch on something you believe in your heart is crap, or in an area you dislike even if you won’t admit it, you’re way more likely to get screwed. Location matters, and quality counts. Flush times gloss over those facts, but strapped times put them into high relief.
babs, there isn’t a direct 1-to-1 correlation between people who’ve tried to buy 1BRs that eventually ended up in studios. I know -numerous- people (myself included) that are sitting this out and renting til end of ’07 when the market will be flooded with properties.
There’s no sense throwing money into a market that’s so fundementally out of balance.
I live in Fort Greene/Clinton Hill and think it’s a laugh at how much the “idiot” manhattan transfers are paying to own part (not all, mind you) of a brownstone here. I have seen 1st level condos with no sunlight go for 700-900M the past few years alone. This area is nice but will never be the “mecca” the real estate agents are selling it as. I can’t wait to get myself a nice piece of property at a more than reasonable rate when the yuppies figure out they’ve been had.
Man, babs, I’ve had the same issue with my sister – she refuses to leave Manhattan for Brooklyn, even though I’ve told her it would be much easier on her wallet! She just won’t hear it. I moved out of Manhattan a few years back and don’t regret it – my giant apartment and nice, cash stuffed wallet feel so much better about it:)