Brooklyn Numbers In.... 10% Down

not anymore...

Brooklyn Home Sales Jump 18% as Buyers Seek Deals on New Condos 2011-10-20 04:01:01.5 GMT

By Prashant Gopal and Katie Spencer
Oct. 20 (Bloomberg) -- Home sales in Brooklyn, New York’s most populous borough, climbed 18 percent in the third quarter as rising apartment rents and low mortgage rates drove demand for condominiums in new developments.
Purchases of condos, co-ops, and one- to three-family homes totaled 2,219, up from 1,879 a year earlier, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today in a joint report. Sales of newly built condos surged 65 percent. The median price of all homes sold in the period rose 5 percent from a year earlier to $510,000.
New condos across the East River from Manhattan are luring international buyers and renters who see the properties as relative bargains, according to Jonathan Miller, president and chief executive officer of Miller Samuel. Manhattan apartment rents rose 4.9 percent in the third quarter, to an average $2,970 a month after landlord-sponsored concessions, the companies said in a report last week. Low borrowing costs were also an incentive for purchases, Miller said.
“Where I see a lot of the kick is on the condo side,” he said. “I look at the market as gaining firmer footing, and continuing to improve gradually.”
While home sales have increased, they’re less than half the peak reached in the third quarter of 2005, according to Miller.
“We’re doing a little better than moving sideways in Brooklyn, but just barely,” he said.
Sales of all condos jumped 53 percent in the third quarter from a year earlier to 839 units. The median price was $549,753, up 6.7 percent from a year earlier. New condo sales, which totaled 385, had a median price of $590,585, a 7.8 percent jump.

Williamsburg Deals

In the Williamsburg and Greenpoint neighborhoods, where 87 percent of transactions were in new condo developments, 307 homes changed hands, a gain of 68 percent from a year earlier, according to Miller Samuel and Prudential.
About 60 percent of buyers in the Edge, a 565-unit complex on Williamsburg’s waterfront, came from Manhattan and about half of those moved from rentals, said Highlyann Krasnow, a partner with MNS, the project’s marketing and sales broker.
Sales in the Edge’s two towers have accelerated this year after a lull that began with the September 2008 bankruptcy of Lehman Brothers Holdings Inc., according to Krasnow. Buyers closed on purchases of 184 condos from May 2008 through the end of 2010. Since then, 155 deals were completed and another 55 are under contract, she said.

‘Good Opportunity’

First-time buyer Andrew Chen moved in July to a 1,600 square-foot (149,000-square-meter), two-bedroom condo in Williamsburg’s 80 Metropolitan. Chen, 30, had been renting in Manhattan’s Hell’s Kitchen when he decided to settle down with his fiancée in an area with more of a neighborhood feel.
The couple started surveying the market in February and saw two apartments they liked. When they came back ready to buy about a month later, both units had sold.
“That definitely made an impression on me in realizing if we don’t move now, we’re going to lose all the good spaces,”
said Chen, who works with technology and media start-ups at the New York City Economic Development Corp. “It worked with our timing, but it did make me feel much more rushed in wanting to move fast before we lost a really good opportunity.”
Mark Grossmann, 34, said low mortgage rates and housing affordability influenced his decision to buy an apartment in the Edge after he and his wife rented in Williamsburg for two years.
The couple went into contract on a two-bedroom duplex in July and the deal was completed this week. The price was $1.34 million.

‘Less to Own’

“We’re paying less to own than we did to rent,” said Grossmann, a financial planner. “It’s a great environment out there. If someone is a qualified buyer with good credit and they have 20 percent to put down, banks are lending.”
Rates for 30-year fixed mortgages declined from 4.6 percent at the beginning of the third quarter to 4.01 percent in the week ending Sept. 29, according to Freddie Mac. Earlier this month, rates dropped below 4 percent for the first time in the McLean, Virginia-based mortgage financier’s records.
Deals for co-ops in Brooklyn climbed 0.8 percent from a year earlier and the median price rose 5 percent, to $315,000, according to Miller Samuel and Prudential. Sales of one- to three-family homes climbed 5 percent and the median price was $539,500, a 3.8 percent increase.
Brooklyn homes stayed on the market an average of 149 days in the third quarter, up from 109 days a year earlier.
In Queens, the city’s second-most-populous borough, sales fell 12 percent in the third quarter to 2,743, according to the joint report. The median price jumped 8.5 percent to $385,000.
Homes stayed on the market an average of 108 days, an 8 percent increase from a year earlier.

For Related News and Information:
Top Bloomberg News real estate stories: TOPR Stories on the U.S. property industry: TNI US REL Stories on the homebuilding industry: NI HOM Miller Samuel Manhattan prices: MLH SQFT GP Personal wealth stories: NI PW CN New York City unemployment: USCUNEWY GP

of cse a tainetd brokers report

“We’re paying less to own than we did to rent,” said Grossmann, a financial planner.

THIS I'D LIKE TO SEE!

Be nice to the new buyer! He's probably not counting his dp and transaction costs, just his after-tax monthly cost. He may also comparing apples and oranges (rent in Manhattan vs. mortgage in Broklyn.) I wonder if he actually figured out the real tax advantage, or just took the Corcoran website figures. The new apartment smell is priceless.

grossman

sale price $1.34M
down $268K
mortgage $1.072M at 4.5% (he can dream about this rate) = $5,400 per month

add to that $1K in maintenance and..... you should be able to afford a manhattan apartment of 1500 sq ft for $6,400 per month.

we need to find out where the moron works and take our money out.

Can someone get 4.5% on a jumbo loan with 20% down? Are rates this low?

Be nice to the poor renter, they're probably not counting their annual rent increase.

Brooklyn is 1st choice for those priced out of Manhattan. 18% increase indicates prices are attractive for buyers.
It's not a home run but Brooklyn Condo market is batting singles, maybe doubles here.

http://www.businessweek.com/news/2011-10-20/brooklyn-home-sales-jump-18-as-buyers-seek-new-condo-deals.html

Oct. 20 (Bloomberg) -- Home sales in Brooklyn, New York’s most populous borough, climbed 18 percent in the third quarter as rising apartment rents and low mortgage rates drove demand for condominiums in new developments.

Purchases of condos, co-ops, and one- to three-family homes totaled 2,219, up from 1,879 a year earlier, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today in a joint report. Sales of newly built condos surged 65 percent. The median price of all homes sold in the period rose 5 percent from a year earlier to $510,000.

maly
"Can someone get 4.5% on a jumbo loan with 20% down? Are rates this low?"

As I understand it based on feedback from mortgage broker I have been working with to get lowest-most competitive rates

~CoOps in $1M+ range - 30% down
~Condos-Houses 25% down (remember your closing costs are several times higher so you'll need another 3-4% cash for that too)

For Jumbos you will see an additional 6-8 point spread - so if conforming (now 625,500 single family/unit) runs 4.25% then add .6-8 for jumbo. Still very low but I cannot help but wonder how the low rates are impacting prices. Things are seeming a bit 'frothy' in Brooklyn (as you probably know if you are the maly from a popular RE site out here). New Yorker just ran an article about how hot it is in Brooklyn- usually articles like this precede an adjustment. But who doesn't want a house in Brooklyn these days (remember the 1970's!). Not sure what 2 family conforming is, but perhaps there's a bit more 'wiggle' room there as well.

maly, i was being very generous with the 4.5%. it's closer to 5%.

as for the increase in sales, i find that the people who buy new condos in Brooklyn keep telling me "The tax abatement is great. I'm paying a little more to own then rent." When asked what they expect to happen after the abatement will be gone, the answer is "It's so far away, who knows what will happen in 10-12 years." what they are forgetting is that the abatement is a fased out in steps. On every step, you pay more. you may not need to wait until it's all gone, the pain will start much earlier, like 2-3 years. it will just not hit you all at once, they will start chopping your fingers one at a time rather then chopping the whole hand at once.

some people who bought 5-7 years ago are seeing what is happening with the abatement and are unloading their garbage on the other idiot who thinks the way they were when they purchased.

How come I can't get my message posted???????

With rates this low, the market should be boiling hot, and it seems to be that in Williamsburg. I think prices are somewhat held in check by the fact that even though rates are low, banks are more discriminating in their lending practices. They're lending pretty well for new developments, but the market is not supporting profits for developers. As far as houses in Brooklyn, I'm seeing a lot of all-cash or mostly-cash deals, Manhattanites "investing" their gains and trustafarians/banks-of-mom-and-dad types. It's kind of interesting, that unlike the real bubblicious times, where every segment rose at a similar rate, and the offering volume responding, now the various sub-markets are behaving completely differently.

Many of the major projects have 25 year abatements. It phases out starting...um..two decades from now....

ab_11218, you've way overstated the unabated tax issue before. See here:
http://streeteasy.com/nyc/talk/discussion/21705-15-versus-25-year-tax-abatement

> Brooklyn is 1st choice for those priced out of Manhattan

You're talking about the parts closest to Manhattan... but Brooklyn is much bigger than that.

You also gloosed over the fact that it looks like a dead cat bounce...

While home sales have increased, they’re less than half the peak reached in the third quarter of 2005, according to Miller.

“We’re doing a little better than moving sideways in Brooklyn, but just barely,” he said.

yes-- ridiculous to think RE in Brooklyn is going up- or will go up.. a bunch of pollyanas

Brooks2, well there certainly was a little bounce. I don't think it'll last either, but completely denying it happened isn't right either.

"some people who bought 5-7 years ago are seeing what is happening with the abatement and are unloading their garbage on the other idiot who thinks the way they were when they purchased."

Exactly right. Apartments with only a few years left on the abatement will be less desirable than they used to be unless prices react accordingly. Anyone who buys an apartment that has a tax abatement, either 10 year, 15 year, or 25 year, is betting heavily that appreciation will overcome the built-in depreciation that the abatement causes from day one. It's like driving a new car off of a dealer lot. Oops, it's already worth less! Unless the market is really strong when the seller wants to sell, these units have a big strike against them in the form of steadily increasing taxes (in addition to the "run-of-the-mill" annual tax increases that the city levies). A buyer really would have to be an idiot not to care.

There's so much confusion/bad information about the whole tax abatement thing. Two general comments: 1) unabated taxes are not nearly as bad as some make them out to be, and, 2) because of the confusion, it's doubtful impending unabatement is being properly priced in - kind of what NYRocks is referring to. It will impact those who didn't bother to do their homework when they purchased, but I do think that some around here blow that out of proportion.

As for tax rates themselves, they haven't gone up as much as some think: 73 bp since 03/04. They even went down for some periods in between (see Class 2, where the vast majority of us fall).
http://www.nyc.gov/html/dof/html/property/property_rates_rates.shtml

bj, what you are forgetting is that most of these new condos have higher cc costs. once you take all of the costs (cc & taxes) into consideration, which most people do not, it becomes stupid to buy.

Anyone dumping an apartment because of expiring abatements is an idiot, unless they can't meet the cash flow of the higher taxes. The reasons is simple, You paid more for the Condo because it had the abatement. You should have been wiling to pay an extra amount equal to the present value of the original abatment and in exchange received an annual cut in real estate taxes. Each year the remaining term of the benefit decreases as does the remaining present value. The key take away is the condo value is decreasing at the same rate as the value you've realized from paying less taxes. The party that really benefited was the Sponsor/Developer who got to sell the Condo to you for a higher price because of the abatement.

ab, how am I forgetting that? I'm definitely not. Even new Brooklyn condos generally don't have ccs that are crazy high. There are certainly exceptions, but even a place like the Edge has relatively low ccs. 1,400+ sqft 2BR/2.5BA penthouse: $1,182/mo. I've seen more for <900 sqft 4th floor walkups in dinky co-ops in Manhattan.
http://streeteasy.com/nyc/sale/607824-condo-22-n-6th-st-williamsburg-brooklyn

now take that and add $25K per yr in taxes and the monthly bill is $3Kish.

the people that are selling still have reasonably low taxes and play on that when selling Riversider.

i've spoken to people in the past and resently as well and everyone keeps telling me the same thing. people have blinders on because they see something shinny and new. i just bid about the same for a house (3 br/2 bth, basement, small outdoor space that needs $50K in updates) that a 2/2 900 sq ft condo next door is selling for. having minimal price difference between these 2 real estate products is just nuts.

$25k/yr in taxes? Where are you getting that number from? I smell bs...

agreed ab, and check how much less taxes on houses in Bklyn are compared to monthlies (including full ticket taxes if currently abated) in new construction apts--it's incredible-- in some cases one month of monthlies in an apt is nearly equal to entire year of taxes in a comparably sized house--i considered for a very brief moment buying a large new apt in bklyn, until i saw this glaring discrepancy--big new construction, family-sized apts in bklyn sit stale forever as a result of this

"big new construction, family-sized apts in bklyn sit stale forever as a result of this"

Bottoms, just cause you repeat this ad-nauseum doesn't actually make it true. Look at the weekly biggest sales on Brownstoner. Almost always includes big, new construction, family-sized apts.

And someone please show how they got to $25k/year in taxes.

the gov site is down... will have to wait till monday after reboot. or you can read this as the price is right there for their unit

http://www.nytimes.com/2009/02/08/realestate/08COV.html?em

ab_11218, as many around here might tell you, NYT RE section is an advertorial, so not always the best information. On top of this, the article (that's 2.5 years old) quotes a lawyer who clearly does not understand how the abatement and tax calculations work. It DOES NOT spiral as he says it does.

Go here: http://webapps.nyc.gov:8084/CICS/fin1/find001i
(so much for the govt site being down)
Search for 22 North 6th St, PH3G (a bigger apt than the one I mentioned) and look at the quarterly statement. At the bottom, you'll see a section called "Annual Property Tax Detail." That number right under where it says "Taxes" is the full year's unabated tax amount. A whopping $1,553 ($129/mo). That won't come into effect for 25 years of course (right now they pay $121 per YEAR), but that's actually amazingly low.

i agree bj that NYT is full of crap. telling me that the taxes on a 1.5M condo will be $1500 is also crap.

that site is also down, at least for me.

Network Error
A communication error occurred: "Operation timed out"

ab, the tax form says it loud and clear. Just because you don't want to believe it doesn't make it untrue. Sorry.

It looks like the Edge folks did a particularly good job arguing down the estimated market value (which is what taxes are based on - and note they have nothing to do with the real market value, one of the weirder aspects of NYC property tax code). For comparison, my unabated taxes are significantly higher, though nowhere near the $25k you made up. Not even close.

Try this maybe:
http://nycprop.nyc.gov/nycproperty/StatementSearch?bbl=3023321458&stmtDate=20110826&stmtType=SOA

i give you that bj. don't know they did it. what i've seen is that $800K units are in the ballpark of $8-10K.

I'll take a look at other buildings when I have more time, but I still suspect your estimates are high. Don't mean to be picking on you - I've just found that very few people actually understand this. It's so poorly explained, and I can only imagine how little of it the brokers actually comprehend...

FYI, my 2/2 unabated taxes will run ~$5.5k/year. And compared to the Edge, looks like we sucked at appealing market value. I should bring that up to the mgmt co...

I think there is all the difference in the world between manhattan 10 year and brooklyn 25 year abatements.
Manhattan is a definite disadvantage when likely to sell 7 years later. Brooklyn at 25 years, its an advantage. A great advantage. Spending 10 years in a new unit in brooklyn is like 4 in manhattan (abatement wise)
And anyone I know currently in the market both wealthy and poor are all about the monthlies. I even argue to the wealthy on paying $1K more a month if you can get over $300K off the price is to their advantage and they don't want to know.

truthskr, arguable. Depends how much you think the abatement was baked in to the purchase price. But yeah, agree that people do focus on the monthlies. They do tend to forget a couple things though when comparing to a rental (transaction costs, etc, though on new dev you can certainly get the sponsor to cover some, if not most of those for you).

ab, a couple more:
http://nycprop.nyc.gov/nycproperty/StatementSearch?bbl=3009611109&stmtDate=20110826&stmtType=SOA
http://nycprop.nyc.gov/nycproperty/StatementSearch?bbl=3023631098&stmtDate=20110826&stmtType=SOA

This one's for Bottoms. No sign of those new construction family-sized units, huh?
http://www.brownstoner.com/blog/2011/10/last-weeks-biggest-sales-21/