Brooklyn condos benefiting from tight Manhattan rental market

By Adam Fusfeld | October 20, 2011 12:13AM

The extremely tight residential rental market in Manhattan may be having a positive
impact on sales in Brooklyn. Home sales activity in the Borough of Trees skyrocketed
and the median home price showed significant gains, according to a third-quarter market
report released today by residential brokerage Prudential Douglas Elliman.

“Brooklyn is showing signs of firm growth,” said Jonathan Miller, CEO of appraisal firm
Miller Samuel and preparer of the report. “The key driver of that growth this quarter is
the condo market, which I think is benefiting from the high rents in Manhattan combined
with the falling interest rates.”

Overall, there were 2,219 sales in Brooklyn during the third quarter, 18.1 percent greater
than the number of sales in third quarter of 2010. Simultaneously, median sales price in
the third quarter rose 5 percent from the prior-year quarter to $510,000. The growth in
those two categories denotes a healthy market, Miller said.

As Miller alluded to, that growth was fueled by condo purchases, the number of which
rose 52.8 percent from the third quarter of 2010 to 839. The median sales price gained 6.7
percent in that time and reached $549,753.

Outside of condos, a particularly weak second quarter yielded near double-digit price
and volume growth on a quarter-over-quarter basis across almost all property types,
price classes and neighborhoods. Year-over-year, Williamsburg and eastern Brooklyn
experienced 12.8 and 11.6 percent median price gains, respectively, while activity shot up
more than 65 percent in Williamsburg. Elsewhere in the borough the price gains hovered
between 5 and 10 percent.

The lone exception was affluent northwestern Brooklyn, which Miller said is further
down the road to recovery than the rest of the borough.

In Queens, on the other hand, the recovery is far less stable. The number of sales
decreased 11.8 percent from the prior-year quarter to 2,743, while the median sales price
increased 8.5 percent to $385,000. The fact that those figures move in opposite directions
is an indication of a vulnerable market, according to Miller.

That decrease in activity may be due to less foreclosure activity in southern and
central Queens. Banks have slowed the foreclosure process thanks to the robo-signing
scandal
, and south and central Queens, areas that
were hit particularly hard by the housing bust
, activity
plummeted 26.6 and 13.3 percent, respectively, in the third quarter from the same three months last year.

Though median home prices have risen 12.6 percent in Queens since the second quarter, there was a 27.3 percent drop in condo prices during that same period. Miller was at
a loss trying to explain the disparity, but noted that the second quarter sales market in Queens behaved uncharacteristically, as new developments comprised 8.9 percent of sales in the borough during
that time, approximately twice their typical level. Compare that to Brooklyn, where new
developments make up one-fifth of sales.

The third quarter proved to be a distinctive one for trackers of outerborough data,
as a weak spring buying season clouded the quarter-over-quarter numbers while the
expiration of the homebuyer’s tax credit
just prior to the third quarter of
201 impacted the year-over-year numbers, as would-be homebuyers rushed to complete their purchase in the spring to qualify for the credit.
As the market gains clarity moving forward, Miller anticipates continued growth in Brooklyn, but couldn’t
be sure what to expect in Queens. “The [Queens] market is certainly fragile,” he said.