Real(i)ty Check: Brooklyn Revisited

Posted by jeff

Fri Apr 4th, 2008 09:30 AM

Brooklyn%20Brownstones.jpgWith the flowers starting to bloom and the song birds all atwitter I decided to get a few brokers on the line for an update on the kickoff of spring selling season in Brooklyn. I was a little surprised by how much activity there seemed to be, but I got a strong sense that price concessions are helping rev up demand.

Joan Goldberg, of Brown Harris Stevens, has been a brownstone owner for over 20 years, she sells real estate in Brooklyn Heights, Dumbo and Fort Greene as well as other areas of the borough. She called me from Arizona saying:

The season has started off busy. I'm on a mini vacation break and I still can't get off the phone. A lot of buyers are out in the market and they seem serious. The stock market acting better recently may be a factor. People who are looking for houses are not as affected as the low end. One bedroom buyers are much more careful. I'm not big in condo sales. I have not seen any noticeable impact from tighter financing, but some one bedroom buyers are asking to put down less money, but can't do that in a co-op. My guess is they may have been condo buyers moving over. I don't see any lessening of interest in any particular neighborhood, things are busy in all my markets.
I spoke with Jerry Minsky, a 23-year veteran broker in downtown Brooklyn and the surrounding areas. Minsky works as an SVP for Corcoran, but considers himself a one-man sales machine, as well he should. According to Corcoran's web site he is consistently a member of their Multi-Million-Dollar Club for outstanding sales volume. Here is what Minsky had to say about the downtown Brooklyn market:
The market is at a slow point the likes of which I have not seen since I was a buyer back in the early 80s. I have had 2 sales this week, but prior to that I hadn't had 2 sales since August. We just sold a two bedroom unit on Pacific Street in Boerum Hill, a restored townhouse condo conversion. My associate converted a renter to a buyer for this 1,100 square foot $982,000 unit. It was on the market for one week. I was shocked. A week ago Friday, a Bear Stearns employee signed a contract for $625,000 for a Bedford Stuyvesant brownstone. It took me 90 days to sell this property where it used to take me 30. I call it like I see it and I think we are at the beginning of the end of the down market. I saw it early back in August, where things just felt wrong in my gut. Now right or wrong I will go on the record saying I think the worst is behind us. It's not all rosy mind you, but things should start to get better. Real buyers out there should not sit on the sidelines for too much longer.
With regard to downtown Brooklyn and environs specifically Minsky noted: "Brooklyn is on the map and will come back very strong once the fundamentals of the economy really really stabilize." As for other secondary New York City markets he says "Up and coming markets always come back more slowly."

Over in Williamsburgh, Frank Castoria of the eponymous real estate firm, who has had a presence in his market for 30 years, says:
The market is somewhat overbuilt right now. Everything will eventually sell, but with the economy slowing down, I see the next 2 years somewhat of a correction or slowdown. Prices have come down 10 - 15% on townhouses and condos more like 20%.
My buddy and fellow Union College alum Jeff Winter, co-owner of Coldwell Banker Innovation Real Estate in Park Slope, concurred with aspects of both Minsky and Castoria's observations on their markets.
The condo market is overbuilt and the poorly constructed stuff will sit as sponsor unit rentals until the market recovers and they put them up for sale again. But business overall appears to be picking up. The weather is better and people are coming out to look. Everybody needs a place to live! I had three offers on the same property fall through right after the Bear Stearns meltdown. But people are back making offers on things if they are priced correctly. I have a $1.2 million offer out on a $1.5 million property and the seller is considering it. The good thing with sellers is I don't have to beat the information into them now, they realize that the market has changed. I am doing more due diligence on buyers than I ever have, I need to know if they can close. The problem on the residential side is you never had issues with financing, you could always get a second mortgage or something. Now with the credit crunch it has reduced the funnel of buyers down from a flood to a trickle. So today it's about real buyers and real sellers.
Winter, who has a strong presence in the commercial market in his area as well, offered that:
"On the commercial side I have a mixed use building on Prospect Park, which the seller priced at 15.5x rent roll, but he's seriously considering an all cash offer at about 13x. I have had to put some developers doing rehab projects in touch with hard money lenders. They had their fingers in too many pies and are now looking to cross collateralize the properties they have equity in to borrow money and support project debt payments."


I talked to JJ Katz of Heights Properties, who has been in Brooklyn real estate for 11 years, seven of those in Crown Heights. This market is more affordable for young people than Park Slope or Prospect Heights and the credit crunch seems to be weighing on this market a bit more. Spring has apparently not really started in Crown Heights, but that may be in part due to the reluctance of the Hassidic community to entertain sellers or get very involved in shopping for a home before completing the traditional spring cleaning of their homes ahead of the Passover holiday. According to JJ:

We are feeling the mortgage crisis, banks are a lot more difficult. This is for qualified people, putting down real money, decent credit and reasonable income and the banks are checking every little thing.


During our phone call JJ had to drop off because of a last minute glitch with a financing commitment. Then he called me back. "There were six things the bank said they needed when they made the commitment. All of a sudden they need other things. One little thing was missing on the application and it wasn't even relevant." As for the state of the market, JJ remarked:
A lot of properties are on the market as a lot of people are believing that the market is going to drop even more. As far as buyers, no one wants to be the last guy to pay a high price. In the past you never saw more than 3 houses for sale in the Hassidic neighborhood,now there are many and they are sitting for four months, five months.
As far as the condominium market goes JJ opined that:
In the past two years there was a boom in condo development. Six to eight months ago I sold a piece of land to some developers. The buyers sat for a while, but are now building to get the foundation in the ground before the sunset on 421A. They're hoping that in two years when they are done building things will be better. A lot of condos are sitting empty as prices have fallen below the levels developers were looking for. Three development projects have turned into rentals, and one development of 33 units at the corner of Lefferts Ave and New York Ave is in pre-foreclosure.
So there you have it. Despite financing conditions being sub-optimal, spring has sprung in Brooklyn and buyers are out looking. Properly prices product - generally reduced from recent highs - are moving. The low-end buyer who may be less financially well endowed is suffering the brunt of the credit crunch, along with some developers who were late to the party and penciled in unrealistic sell out numbers. Makes sense, no?


Photo by Ruby Washington - New York Times

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