Housing inventory in the outer boroughs continues to drop, sending prices up sharply in Brooklyn and moderately in Queens, according to Douglas Elliman’s fourth quarter market report, released today. However, rising prices should not be seen as the harbinger of a full-scale recovery, since they are propelled by “artificial” constraints, like extremely low interest rates and a lack of new construction hitting the market, said Jonathan Miller, president of Miller Samuel and author of the report.
In Brooklyn, listing inventory dropped more than 20 percent year-over-year, to 4,685 units—the lowest inventory since Elliman began keeping track four years ago, the report says. There were 7,411 sales in Brooklyn in the fourth quarter, down 8.4 percent from 8,092 sales in the same period last year.
Median prices in the borough rose 12. 8 percent year-over-year, to $512,500 from $454, 383, the report says. And the resale market had a particularly strong fourth quarter performance, according to the report for the fourth quarter from the Corcoran Group. Average price per square foot increased 14 percent, from $498 to $568, while median price for a resale surged 20 percent, to $439,000 from $367,000, per Corcoran’s numbers.
The Brooklyn neighborhood that saw the largest price gains in the second half of 2012 was Park Slope/Prospect Heights, where median prices rose 18 percent, from $553,000 to $650,000, according numbers from Brown Harris Stevens’ semi-annual report, also released today. The areas that fared worst were Bedford-Stuyvesant and Brooklyn Heights/Carroll Gardens/Cobble Hill, both of which saw median price increases of 3 percent year-over-year.
And while prices are on the rise, the import of the statistic for the market’s overall health is not clear, Miller said. Although the 12.8 percent rise was the greatest year-over-year price increase recorded in any quarter since the late 2008 credit crunch, rising prices could be temporary and can mask weak market fundamentals, Miller said.
“You choke off supply, prices go up,” he said.
“We’ve stimulated demand with low [interest] rates and created tight credit,” he added, “and that’s what appraisals and assessments and perceptions of the market are based on.” But the market will still need to wean itself from the artificial boon created by low interest rates, which the Federal Reserve has committed to keeping in place, likely until 2015.
However, the rising prices and diminished inventory are still a good sign, a necessary step on the road to full recovery for Brooklyn and Queens, which rebounded more slowly than Manhattan following the implosion of Lehman Brothers. The market is now “setting the stage for the next step, which is the fundamentals actually getting better,” Miller said.
The lack of inventory could mean “continued upper price pressure,” but probably not an increase in sales volume in 2013, he said. “There is no perception that the clock is ticking,” now that the capital gains tax changes have passed — and those were likely not an overriding factor for most outer borough sellers anyway, he said.
In Queens, the situation is quite similar — the median sales price rose 13.4 percent, to $390,000 from $343,000, compared to the same period last year.
The lack of inventory is just as urgent in Queens, said Miller, who noted that this is the lowest level of inventory in the borough in seven years. Sales in Queens declined 4.4 percent year-over-year, due to the lack of inventory, Miller said.