From left to right: Michael Guerra, director of sales for Brooklyn with Prudential Douglas Elliman; Ken Freeman, senior vice president of sales with Massey Knakal; Lee Soloman, a director with Brown Harris Stevens; and Nalami Clark, a principal with Brooklyn Properties
If ever there were a Brooklyn neighborhood to lead the way for a rebound, it would be Park Slope. With its well-kept brownstones and its proximity to Prospect Park, Park Slope is routinely cited as one of the most desirable neighborhoods in the borough. But while it has seen a recent uptick in activity, even Park Slope has felt the market slide.
Brokers interviewed for this month’s Q & A told The Real Deal that they saw more transactions in the final months of last year compared to the abysmal lack of trades before that. But they said that even properties that were “marginally overpriced” were still not getting the time of day from buyers.
Part of the improvement can be traced back to the fact that inventory is down. That’s because Park Slope sellers who can avoid putting their properties on the market for the low prices are holding back. As one source put it, that low inventory is “an advantage for those that are currently listed.”
Brokers said co-ops are holding up better than new development condos, which are mostly clustered in the South Slope and along Fourth Avenue on the edge of the neighborhood. That’s largely because of the uncertainty associated with those buildings, but also because new-construction condos in other parts of Brooklyn can be had at deep discounts, too.
Not surprisingly, the under-$1 million market is faring better than the high-end market in Park Slope — which has seen a drastic shift downward. For example, while 2008 saw an $8.4 million townhouse sale, last year the high price was in the low-$3 million range, with far fewer transactions. But brokers are now seeing more buyers purchasing properties in need of renovation.
For more on what’s happening with prices, sales volume and buyers in Park Slope, we turn to our panel of experts.
Michael Guerra
director of sales for Brooklyn, Prudential Douglas Elliman
What are you seeing in terms of sales volume in Park Slope?
Typically in the second quarter there’s an increase in the volume of transactions. The second and third quarters are almost always the most robust for transactions. That did not happen for the second quarter in 2009, but we had a stronger-than-usual third quarter. The third quarter was a robust quarter.
How are prices holding up in Park Slope? What are they like compared to three months ago, six months ago and a year ago?
Our market report says prices went down 10 to 40 percent, but that depends on what we are looking at. The buyer in this market is price-sensitive. If the property is not priced appropriately, nobody will come to see it, even if it’s only marginally overpriced.
What kinds of properties are selling in Park Slope in this tough market?
It is harder to hold [a new development] contract than a co-op [contract] because new construction comes with the uncertainty of a certificate of occupancy and closing date. We are selling newly constructed condos at 500 Fourth Avenue, where we have 40-plus contracts for the 156 units because the project has been priced appropriately for this market. [But] we have certainly seen co-ops be more consistent. A buyer may back out of a condo if they think they have a better deal elsewhere, even if they surrender their escrow. There has been a lot of new construction in Greenwood Heights and Williamsburg, and a buyer may decide they can get more space and amenities there.
Is the over-$1 million market still struggling more than the under-$1 million market?
The sub-million-dollar market has been more active than properties priced over $1 million. At the peak in 2008, high-end townhouses were the hottest segment for our company. Now the volume of townhouse transactions in Park Slope has gone way down. The high price of a two-family in 2008 in the 11215 ZIP code was $3.755 million and a special one-family house sold for $8.4 million. In 2009 we haven’t had the same volume and the high price is in the low-$3 million range, but more significantly there are only a handful transactions to pull that data from [for pricing].
What kinds of buyers are you seeing (e.g., first-time buyers, buyers looking to upgrade) and how has that changed in the last few months?
[There were] a lot of first-time buyers in the third quarter, probably due to the government incentive. The credit has been extended [and] we are still seeing it as a reason [for buying], but it’s not at the same volume as when there was an impending deadline. There is a higher percentage of first-time buyers than in the past, but it’s down from the peak in June, July and August.
Are you seeing any foreclosures or distressed deals where the sellers need to sell?
Park Slope tends to be high-income, so the neighborhood does not see that a lot. There is a property on 3rd Street between Seventh and Eighth avenues in distress, but that’s a very unusual occurrence.
During the boom years, the boundaries of Park Slope moved way south. What’s the future of the South Slope now? Are apartments there harder to unload than in prime Park Slope?
The South Slope and Greenwood Heights saw a lot of condo development. Some represents what appraiser Jonathan Miller calls ‘shadow inventory.’ It is not necessarily listed but needs to be absorbed by the market. There is a glut of inventory, too much supply and not enough demand. Those developers are working on disposing of it. Some are priced to sell, some are rentals, and developers are working out their situations with their lenders. However, the townhouse market in the South Slope has been very good, due in part to lower price points than the brownstones in the heart of Park Slope.
Ken Freeman
senior vice president of sales, Massey Knakal
How are commercial prices holding up in Park Slope?
Anybody who gives a number is reading tea leaves because there have been so few transactions. In my commercial newsletter I wrote that pricing has dropped about 30 percent for multifamily, 40 percent for industrial and 50 percent for land from the highs of the spring of 2007.
What are you seeing in terms of the balance of power between apartment buyers and sellers in Park Slope?
The buyer’s market has quickly withered away. There are still a lot of buyers that want to feel like it is a buyer’s market, but there is so little product out there that is correctly priced. There is legitimate competition for those units that are available. A lot of sellers are waiting, hoping someday to see the prices that once existed.
Are you seeing any foreclosures or distressed deals where the sellers need to sell?
In the commercial world there are certainly plenty of distressed properties, but very few of them have actually come to market yet. On the one hand, banks don’t have their act together on how to manage selling the note, foreclose and sell the property, or go to auction. They are figuring out how to manage the bad debt on their books. And then there are some owners that play the game — this doesn’t apply to a little old lady in foreclosure. Commercial real estate owners may play a game of chicken with the bank or some other tactic to increase leverage before actually losing the property.
Park Slope is about old brownstones, not so much new condos. What’s the future of new development in the neighborhood?
There is next to no developable land left in Park Slope except Fourth Avenue. A bunch of sites are frozen until the market comes back, and a couple are on the market. I am a believer in the Fourth Avenue market. I think it will prove viable for residential, and the commercial will follow. I hope enlightened building owners will respect the streetscape and build retail on the ground floor of their projects. It may not appear to be a big moneymaker in the short term, but in the long term there will be significant demand for retail there.
Can you give us an example of a deal you’ve worked on that illustrates what’s going on in the Park Slope market today?
I have a four-family which, back in the day, the owners listed at $3 million. They had an offer for $2.7 million that they rejected. Today there is an agreement, not yet signed, for $2.25 million. The buyer is a first-time buyer with a wealthy parent providing the necessary backstop to get the financing.
What are you seeing in terms of how long it’s taking to sell a property?
[It] certainly takes twice as long to sell a property than it used to, partly due to the bank and everyone’s increased level of caution.
Lee Solomon
director, Brown Harris Stevens
What are you seeing in terms of sales volume in Park Slope?
Last year brokers earned their stripes by negotiating great deals for their buyers. Now you earn your stripes if you are able to educate your buyers that the discount is already built into the asking price.
Which price ranges are faring best and worst?
We are seeing a lot of activity now in the under-$700,000 range. But for a properly priced townhouse between $1 and $3 million [in Park Slope], there have been a number of significant new deals lately, too.
What kinds of buyers are you seeing in Park Slope these days?
I’m seeing a good amount of first-time buyers. The federal tax credit is also helping many first-time buyers who are often buying with the help of their parents. I’m also seeing a lot of interest in buyers looking to upgrade from a one- or two-bedroom, but they often need to sell first. The buyers who are faring the best are the ones who have sold and are in a rental now and are able to pay all cash.
Are you seeing any distressed deals where the sellers need to sell?
I have worked with sellers this year who took an honest look at their portfolios and felt that they had too much of their assets invested in real estate. I think everybody over this past year has started thinking more seriously about diversification. And while I don’t think any of these sellers were under any financial pressure, I do think that they felt that their balance sheet was lopsided and they were ready to either rent or purchase a smaller place.
There are a lot of struggling new construction projects on Fourth Avenue. What are you expecting there in terms of sales and project success?
The sellout of the Novo condominium was an interesting wake-up call to all of us in the neighborhood. Overall it has increased the desirability of our neighborhood. In a few years many of these owners will consider upgrading and I am sure they will want to stay in the neighborhood, and we will all be ready to help them find their next Park Slope home.
Janet ‘Gigi’ Zimmerman
salesperson, Brownstone Real Estate 2 LLC
What are you seeing in terms of sales volume in Park Slope?
I have not seen an increase in sales volume in the third quarter of 2009 over the second quarter of 2009.
How are prices holding up in Park Slope?
Prices have fallen approximately 15 to 20 percent over the past year. Hardest hit are the co-ops and condos, rather than the townhouses. Sales volume is still down substantially across the board, but apartments are having a harder time.
What are you seeing in terms of the balance of power between buyers and sellers in Park Slope?
It is still a buyer’s market in that prices have dropped, but fewer properties are coming on the market. Many sellers have decided to wait out the storm and not sell until the market picks up.
What kinds of buyers are you seeing?
We are beginning to see more first-time buyers exploring the market, but many are just looking.
What’s the future of new development in the neighborhood?
The Fourth Avenue corridor will continue to see development, as will the South Slope, much to my personal chagrin, since I really love the low-scale feel and charming character of the South Slope. The small-frame buildings in the South Slope are attractive to developers, especially if they can amass a few to create a larger lot size, tear them down and build a much larger building, maximizing FAR.
How much has competition between brokers changed in the last year or so?
I have seen offices that refused to co-broke in the past now looking to co-broke.
Nalani Clark
principal broker, Brooklyn Properties
What are you seeing in terms of sales volume in Park Slope?
There was definitely upward movement in the market [in the fourth] quarter. We’ve had more offers, even bidding wars and less trepidation from buyers. Another change is the sale of investment-type multifamilies, which had languished through this downturn. [But] I can easily say this is the longest period of downturn I’ve seen in 25 years.
What kinds of properties are selling in Park Slope in this tough market?
Sales of midpriced townhouses are still fairly steady; I would say up to just under $2 million. Condos are usually asked for by buyers, especially if there is a high co-op maintenance fee. However, many co-ops are in better locations than newly constructed condos. We’re also seeing an unprecedented number of all-cash buyers as well as foreign buyers, both European and Asian. And there’s been a resurgence of people looking for properties needing renovation.
What are the biggest price drops you’ve seen in Park Slope recently?
Sponsors of new developments that have just one or two more to sell in order to be able to have the first group closing tend to be more negotiable on those specific units.
What are you seeing in terms of how long it’s taking to sell a property?
I guess I can say in general things are taking about three times as long as they used to.
Roslyn Huebener
principal broker/owner, Aguayo & Huebener Realty Group
How are prices holding up in Park Slope?
Since the adjustments of last year and earlier this year, prices are holding their own and not declining. Currently, there are fewer houses on the market — the resulting low inventory is an advantage for those that are currently listed. Some houses that remained on the market throughout 2009 received multiple offers in the last quarter.
Which price ranges are faring best and worst in Park Slope?
Under $1 million is doing better. For the most part, buyers are more risk-averse and want to keep their purchase in a comfortable range, whereas they might have stretched previously.
What are you seeing in terms of the balance of power between buyers and sellers in Park Slope?
For the most part, there has been a stronger buyer’s market for condos because of oversaturation. Some of the new smaller condos are faring better than the large developments … because of their limited number.
How much has competition between brokers changed in the last year or so?
In terms of selling among the independent brokers, the cooperation has been better. Listings are shared and sales encouraged. In terms of getting listings, competition is greater. We have found brokers disparaging other firms in order to prevail. Overpricing simply to secure the listing is common.
John O’Reilly
broker/partner, Betancourt & Associates
Which price ranges are faring best and worst?
The high end is still struggling the most. The best pricing range is $750,000 to under $2 million, between two-bedrooms to three-family houses.
What kinds of buyers are you seeing and how has that changed in the last few months?
In the past, Park Slope had always been attractive to people who were willing to renovate. In the last three months we have seen more people who want to be in Park Slope and there has been a shift back to buyers who are willing to look at properties that need work and are willing to renovate.
Can you give us an example of a deal you’ve had that illustrates what’s going on in the Park Slope market today?
We are involved in a development, the Iroquois, as broker and as a developer. It is one block from the park. There are 10 units and in the last four weeks there were five signed contracts. Now we have had multiple offers on some of the units.
What are the biggest price drops you’ve seen in Park Slope recently?
Two years ago a well-located four-story could be priced between $3.4 million to $3.8 million. Now it is difficult to sell above the $3 million mark. There are signs of change. We are seeing more inquiries on the high end, but not too much activity.
Jessica Levy Buchman
senior vice president, the Corcoran Group
What are you seeing in terms of sales volume in Park Slope?
The last quarter of [2009] was very busy. I have experienced bidding wars in a few categories. I had 10 bids on a South Slope townhome, which will be going into contract approximately 5 percent over ask. I had a bidding war on a small two-bedroom co-op, which received eight bids and that went into contract approximately 10 percent over ask.
What kinds of buyers are you seeing in Park Slope these days?
The first-time buyer seems to [be able to] afford more due to rates still being so low. So instead of the one-bedroom apartments they are now going for two-beds. The one-bed category for me has been a bit more challenging than the two-bed category. The three-bed and townhome category is more affordable than it was, so buyers are trading up.
