Brooklyn Brokers Wait on Debt Ceiling Solution With Bated Breath

The real estate market was among the areas hit worst by the most recent recession, but as Brooklyn real estate companies have begun to experience a slow rebound this year, they are now left to wait and speculate over the potential effects of the debt ceiling crisis.

According to Hal Lehrman, a principal broker at Brooklyn Properties, housing prices dropped as much as 15 percent during the peak of the late-2000s recession, and the current debt ceiling crisis could bring the housing market to similarly frightening times.

“If it does default, it will bring us back to the worst part of that recession,” said Lehrman. “The stock market has been in terrible shape and even though everybody is expecting that they’re going to raise the debt ceiling, it still negatively affects the psychology of potential buyers.”

Lehrman said the credo that owning an apartment in New York City is guaranteed to be a successful investment has been deeply damaged in the last decade, citing several clients who bought property four or five years ago and have yet to see a return.

“If the sense of the market is that things are going to get worse, people are going to slow down,” said Lehrman. “It’s a self-fulfilling prophecy.”

The effects of a potential economic crisis will do more than prevent those who have scrimped and saved in order to buy a home from moving forward. Wealthy Brooklynites who are waiting for a strategic time to buy property may also opt to wait for an improved economic climate.

“You aren’t going to see many foreclosures in a neighborhood like Park Slope, but mortgages also have an effect on the wealthy because even though they’re not in danger, they’re waiting for a specific time to buy,” said Lehrman.  

The current crisis arguably could not have come at a worse time for the real estate market, which is finally beginning to rebound throughout the borough after a three-year slump. Lehrman said that Brooklyn Properties just had their strongest month of the year.

However, brokers are also expecting the possibility of a one to two month period where buyers who are currently in contract quickly close on their deals before the market potentially slows down and interest rates skyrocket.

“Almost exactly a year ago, there was a deadline on Obama’s tax credit and it was our busiest month of the year,” said Lehrman. “We didn’t get any more business, but people who were in contract felt the need to speed up the process.”

For many new property owners, the current debt ceiling crisis is leaving them to question when, or if, they will see monetary gains on their property.

“We spent so much time researching Brooklyn and were so strategic in picking this neighborhood because we truly believed there might be a great return on our apartment a decade down the line,” said Elizabeth Leish, who moved into a three-bedroom apartment in Cobble Hill last year with her husband and two children. “We're not so sure about that anymore.”