Displaced homeowners from waterfront communities combined with a lull in new development has created a shortage of homes for sale and fewer rentals in Brooklyn, according to recent realtor reports.
The borough is experiencing the lowest inventory in four years, according to the Douglas Elliman Fourth Quarter Brooklyn Sales Overview, released on Wednesday. With an influx of displaced residents flocking to temporary living situations and credit requirements stalling new building projects, the market was unable to keep up with demand at the end of 2012, says Michael Guerra, Douglas Elliman's Executive Vice President and Managing Director of Brooklyn.
"You have a natural disaster, which created an aberrant amount of demand for rental properties," explained Guerra. "So the rental market saw some absorption from displaced homeowners." In the meantime, the recession stalled some development projects in distress and stopped others that were in need of credit to begin.
"So we are seeing a lull," he says. "Credit requirements for developers are not as stringent as they were at the start of the recession. But right now we don’t have very much to show for it."
Despite the stalled residential development, the opening of the Barclays Center as well as other cultural trends did bring renewed interest to some neighborhoods, such as Fort Greene, where rents grew by an average 22%, according to a year-end report by MNS Real Estate.
In fact, the mean studio apartment rental price for 2012 reported by MNS in Clinton Hill netted out at $1,651 and in Fort Greene at $2,853, the priciest rent in any Brooklyn neighborhood documented.
The lack of options as of 2012 means that whatever properties are currently available, are flooded with offers and going for a premium. The median sales price in Brooklyn during the fourth quarter jumped 12.8% to $512,500 from last year, according to Douglas Elliman. This figure is indiscriminate of neighborhood.
“There is demand across the board," says Guerra, who illustrated his point with an anecdote about a recent property up for sale. "We had an open house this weekend [that attracted] 120 people—120 people in early January! There were five offers on the spot and offers have continued to come in throughout the week."
Guerra added that the high level of interest is also contributing to "upward price pressure." But he did acknowledge that “renovated or like-new condition has far more appeal” to buyers.
While the future development of new residences could potentially shift the upward-trending sales and rental prices, realtors are also waiting to see how the market responds to waterfront properties moving forward.
"The real question on everyone’s minds is whether to rebuild in these communities or sell property at a discount: Will people want to live there still?" Guerra posits. "This was the first significant storm in years that made people reevaluate that equation: risk versus reward. Yes, it’s great to be near the water. But storms are occurring across the world, and when they hit the damage is immeasurable.
"It’s a conversation that has begun but not matured," he says. "The answers are still forthcoming."