Supply and Demand Getting Out of Whack?
The cover story in the real estate section of yesterday’s New York Times was about the impending glut of new condos in Manhattan, its impact on the market and how developers are reacting. With more than 28,000 units in the pipeline–about half of them under construction and half in the planning stages–many developers are switching…
The cover story in the real estate section of yesterday’s New York Times was about the impending glut of new condos in Manhattan, its impact on the market and how developers are reacting. With more than 28,000 units in the pipeline–about half of them under construction and half in the planning stages–many developers are switching to rentals or even other uses like hotels or commercial space. This got us thinking about Brooklyn. Dumbo and the area around McCarren Park seem like the only areas with a high concentration of condos coming online over the next year (not including the big plans for Coney Island). The Flatbush Avenue corridor projects are a little further out on the timeline and could be affected too, we guess. What’s interesting is that the Greenpoint projects are experiencing pressure but the Dumbo market appears to be holding up nicely. Any other areas that you think are vulnerable to oversupply?
Changing Course to Avert a Glut [NY Times]
Photo by Tony Cenicola for The New York Times
The more Manhattan declines, the even further Brooklyn will. Brooklyn’s nice and all, but let’s face it: it’s always been and always will be the second-tier borough when it comes to the whole NYC experience. Brooklyn’s the zeitgest now because Manhattan is so astronomically expensive – the people who moved there would’ve been the people moving to Manhattan 12 years ago.
Most people who weren’t born and raised in the NYC area have no idea what Brooklyn even is, except that when they get here it’s the “closest thing thing to Manhattan” they can afford.
Once Manhattan declines significantly, if ever, there’ll be a mass exodus from Brooklyn – except for the few tweedy types who’ve always inhabited Park Slope, BK Heights, etc.
The lack of rentals — and the high cost — had forced young couples and singles into buying and pushed up prices at the low end, allowing lots of folks to trade up on their gains. With less pressure to buy (more rentals at more competitive costs), the whole thing falls apart. Just wait till next summer…with hundreds of new luxury rentals in all those condos!
(Not disagreeing that there won’t be a problem when all those new condos come onto the market, just disagreeing that people have been buying because they were “forced” to. The housing bubble was more about delusional mass psychology driving the market, not rational economic choices based on a buyer’s market.)
Who is willing to pay $250 per buildable sq ft. ? I want to know them as I have a lot for sale at that price!
Anon 11:08, that’s just not possible. You can’t “force” renters into buying. If you don’t have the savings for a downpayment, you won’t buy.
And rents are higher than last year, yes, but its’ still not a buyer’s market.
Anon at 10:47, that’s one building. Got stats on buildings down the road, next door, etc? No? Didn’t think so. It’s foolish to think the market can be judged based on sales in one building. That’s what this whole thread is all about. You apparently fall into one of the microcosms doing ok.
The lack of rentals — and the high cost — had forced young couples and singles into buying and pushed up prices at the low end, allowing lots of folks to trade up on their gains. With less pressure to buy (more rentals at more competitive costs), the whole thing falls apart. Just wait till nest summer…with hundreds of new luxury rentals in all those condos!
Absolutely a condo ‘glut’ would be felt in all neighborhoods. They are all linked. And if condos became so much cheaper than buying brownstone/house will affect those prices also.
Article seems to show new inventory coming along much faster than it can be absorbed. So great news for buyers in future. Many of what was to be condo – will end up being rental until market changes.
How much will prices weaken is anyones guess. If economy/job market stays healthy – will mitigate downward price pressure.
Walk thru any neigborhood near downtown and you’ll see many smaller projects besides all the big ones mentioned. And don’t forget One Brklyn Bridge Pk, the old gas station prop corner of Atlantic/Boerum.
Personally I think it’s foolish to think that by a glut of condo stock, the prices will fall significantly.
Basic economics would dictate that high acquisition prices + higher building costs (in most places)= higher amount per sell-able sq. foot. With prices in Brooklyn hovering around $250+ a sq. ft. and up to build, 20X100 ft. lots (tear downs) going for $800K, I do not see any developer dropping their price below $500-600 per sell-able sq. ft. any time soon.
Better to rent and wait out the storm until the market shifts once again…
And I do not think that’s good news for renters 🙁 Luxury condos will in turn become luxury rentals…
But, it all comes down to what one can afford these days 😉