If you pay attention to some media reports, north Brooklyn real estate is still booming. “The world is not coming to an end. Repeat, everything is okay,” property blog Curbed.com proclaimed recently following a record breaking condo sale in Williamsburg. Admittedly, mid-range residential prices have risen more than 10 percent from July to September in the gentrifying areas of Williamsburg and Greenpoint, while prices in neighboring zip codes dropped only slightly in the same quarter as the economy nose-dived. Meanwhile Brooklyn Heights recorded its highest residential purchase price last month with a $10.8 million brownstone sale on Remsen Street. Then “The Edge” condominium development in Williamsburg announced shortly after that it had smashed the neighborhood record with the sale of one of its premier duplex apartments for $5.145 million. These records are misleading. Although there are pockets of prosperity in certain neighborhoods, realtors working on the ground tell a different story – one of falling demand, capital for home buying and home prices. They also describe a transformation of the real estate market – once a fertile ground for speculators and foreign investors – into one sustained by long-term buyers only. “There’s a downturn across the borough. Anyone who says there’s not is looking through rose-tinted glasses,” says Sal Cappi, Vice President of Filmore Real Estate, who handles residential sales in Boerum Hill and surrounding downtown areas. “The speculative part of the business really took a beating. People who have bought to re-sell in the near future – that part of the business is pricing down in anticipation of the next few years. But homeowners with a time frame of 10-15 years will still buy for the right price – and some will still pay a substantial price.”
Some observers attributed the Remsen Street record to northern Brooklyn’s assimilation with the Manhattan real estate market and the fact that brownstones are a scarce commodity. Josiah Madar, Research Fellow at the Furman Centre for Real Estate Policy, admitted the sale was “a little surprising” amid the economic crisis, but argued that neighborhoods like Brooklyn Heights, Boerum Hill and Cobble Hill do not conform to real estate trends in the rest of the borough. “Due to their proximity to Wall Street, quality of housing, and the demographic that lives there,” Madar said, “those markets are more tied to Manhattan-type issues and more closely aligned, in this case, with the very high end Manhattan residential market. Brownstones are still such a limited commodity and they are always in relatively high demand even when things go south.”
The brownstone market, which only accounts for 3 percent of borough sales, has made significant price gains since the 3rd quarter of 2007, with an 8 percent increase in the average sale price, but the number of sales is now down nearly 60 percent compared to the same time last year. Meanwhile, sales of newly built properties in Williamsburg have also slowed – despite fetching the occasional phenomenal price. “In Williamsburg you’ll see records because there’s been so much new construction and so much high end construction in recent years, and that’s what for sale,” Madar argued. “And it’s not surprising to see lots of huge sale prices – the odds of setting a record are higher when the residences are new.”
However, the recent record breaking price at “The Edge” actually represented the combined sale of two separate apartments, so it is not as significant as publicized. It also masks the fact that sales have slowed considerably at all developments. Apartments at the Kent Avenue site went on sale in April but developers have so far sold only 20 percent of the 575 units. Meanwhile at several other projects nearby, such as The Realto on North 5th Street, as few as 30 percent of the properties that went on sale in May have moved. Sarah Burke, senior vice-president of the Developers Group building the schemes, admitted the market has “slowed” in recent months and it has been forced to re-adjust prices in some locations. But she remains optimistic and is expecting things may get better with the inauguaration of Barack Obama in January. “This is the end of a marathon for us so we didn’t expect a sprint,” she said of the low condo sales figures. “This is a very good time to get out there – there are deals to be had.”
This is not true if you are an overseas investor. The group had kept the Manhattan and north Brooklyn housing markets afloat when the weak dollar provided relative bargains. That is now changing as the Euro and pound both slide against the greenback. “There’s still interest from overseas,” added Filmore’s Sal Cappi. “But with the dollar strengthening it has had some impact. The discount is not as great so there are less foreign buyers.” Cappi has worked in Brooklyn long enough to remember the last big housing market slump two decades ago. He sees similarities between the causes of the two crises and expects the same outcome. “Prices fell by around 25 to 30 percent then, and it’s similar to 1987 now. Real estate is a cyclical market – it goes up and down like a wave but it always ends up going higher eventually.”
- Katya Wachtel and Joe Jackson
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