There’s no doubt about it: Brooklyn remains hot. But while the flames that fanned this market keep core areas warm, a cooling can now be found in the borough’s more farflung neighborhoods, which had been embraced by many as up-and-coming places to buy a home.
You know the story: As more buyers poured into Brooklyn, prices in popular areas such as Brooklyn Heights, Cobble Hill, and Park Slope became out of reach for many people looking to live in the borough.
Neighborhoods once ignored by potential buyers and renters such as Bedford-Stuyvesant, Bushwick, Crown Heights, East Flatbush, East New York, Lefferts Gardens, Sunset Park, Red Hook, and the far reaches of Fort Greene have grown in popularity.
There are still signs of growth. Townhouse sales alone were up 14.3 percent in the borough in the second half of 2005, according to Halstead Property chief economist Gregory Heym. The pace of condominium development in neighborhoods such as Bedford-Stuyvesant, which has typically been known for one-to-four family homes, is quickening. Restaurants and cafes are popping up on blocks where there were few or none. And of course, property prices have climbed rapidly
“You cannot get a townhouse for under $1 million in many neighborhoods anymore,” said Aryn Drake-Lee, an agent at Brown Harris Stevens. “At the same time, there are still a lot of buyers who would like to own a Brooklyn brownstone.”
But this rosy picture has a few shadows in it — newly popular neighborhoods where property values are still in flux may be most vulnerable to rising interest rates and buyer hesitation, both factors in a national real estate slowdown.
“A lot of people are starting to get nervous,” said Hakim Edwards, an agent at Park Terrace Properties in Brooklyn. They’re asking, “am I really going to pay $600,000 to live next to an abandoned building?”
For some potential buyers, the answer remains yes, though lenders are getting a little picky. Starting around last October, some banks and mortgage companies began looking at appraisals a second time and asking for more comparables, Edwards said.
“If it’s not going to fly, they are going to try to get the buyer to put out more money,” Edwards said.
Developers in Red Hook are feeling the strain. Even with the advent of new development in the area — such as a planned Ikea big-box store — banks are getting more conservative about financing new residential projects, said Fillmore Real Estate associate broker Nicole Galluccio.
“I’ve heard complaints from my buyers. I work with a lot of developers [and some are] having issues in these neighborhoods,” Galluccio said. “I don’t think a lot of the lenders are as familiar with the neighborhood and there aren’t a lot of comps.”
Still, lack of inventory is keeping prices in Red Hook solid, she said. Young professionals are coming to the area and condos are hard to come by. “Look at the size,” Galluccio said. “Red Hook is a mile-long peninsula. Bed-Stuy is a massive area. [There is] more housing inventory in Bed-Stuy.”
In January 2002, Fillmore sold a two-family, two-story brick townhouse in Red Hook for $185,500, Galluccio said. “I just put a piece of property with the same footprint — two-family, two-story brick townhouse on the same block — into contract for over $1 million,” she said. “In May of 2005 we sold a very similar property on a different block for $860,000.”
Still, in some areas, sellers looking to cash out with a bundle of money may find properties stay on the market longer than they expected and they may not get as much for their home as they thought.
“What I am tending to do with co-ops is price them a little more accurately,” Edwards said. “Before, people would try any price and it would move nine times out of 10. Now I am trying rolling back prices a little bit.”
Buyers who have been intimidated by dizzying price spikes may find more comfort in a slower-growth market. In his experience, an apartment that sold for $120,000 in 2004 went for about $215,000 in 2005, Edwards said. In 2006, he said he doesn’t expect prices to drop, but expects appreciation to be around 10 percent.
“Buyers are getting a little excited,” Drake-Lee said. “People have been waiting a long time for the market to dip to get a little more value, but nothing is being given away. Buyers are definitely not in control of the market and I don’t foresee the market being there anytime soon.”
Still, like Edwards, Drake-Lee says asking prices are becoming more conservative in some areas. In Bed-Stuy for instance, prices for townhouses that may have been selling in the high $700,000 to low $800,000 range now have asking prices in the $500,000 to $600,000 range, she said. Pricing in Crown Heights has remained steadier, she said.
“In Crown Heights, it is very tricky to find product,” Drake-Lee said. “We still just don’t have much.”
Even so, buyers are just as aware the market is slowing and aren’t as fast to move on a property in a neighborhood they aren’t sure about. “I know people who haven’t executed on a transaction,” Drake-Lee said, “because they want to make sure their block is a very solid block.”