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All-cash deals are all the rage in Brooklyn real estate

978 Bushwick Ave was listed at 1.195M and is in contract for 1.255M. It is a 3-family in Bushwick. Photo courtesy of DouglasElliman

Brooklyn Daily Eagle

Brooklyn home sales are hot, hot, hot, the latest numbers from brokerage Douglas Elliman show – but you need stacks of cash to beat out other bidders for increasingly scarce product.

“The amount of all-cash deals we've seen in the last six months is unprecedented,” Michael Guerra, an executive vice president and the managing director of Elliman's Brooklyn operations, told the Brooklyn Daily Eagle. “Twenty percent down won't cut it.”

The no-mortgage purchases are for all types of housing, from one-bedroom apartments to brownstone buildings, though previously the all-cash purchases were common only for the highest-priced deals.  

Burgeoning demand and shrinking inventory drove Brooklyn 's median home price to $550,000 in second-quarter 2013, up 15.3% from a year ago, according to the report, which is scheduled for release Thursday. A separate Elliman report also showed big price hikes in apartment rents in north and northwest Brooklyn neighborhoods.

With supply tight, the number of sale transactions fell 6.7% to 1,855 from the year-earlier period, according to the second-quarter Brooklyn sales report, which was prepared by appraisal firm Miller Samuel Inc. The number of homes listed for sale fell 18.5% to 4,704 units.

Properties include all co-ops, condos and 1-to-3-family homes.    

And, the report said, in second-quarter 2012, sale prices were 4% below listing prices – but this year, second-quarter sale prices were virtually even with asking prices.

“One of our largest problems is lacks of inventory; I'm seeing it every day,” Guerra said.

And in bidding wars brought on by the tight supply of available homes, contenders who are able to borrow bigger-than-before sums due to low interest rates on mortgages keep losing out to purchasers with cash in hand.

(Interest rates for credit-worthy buyers are around 3% to 4% for smaller fixed-interest loans and around 4.25% for jumbo mortgages.)    

“Large numbers of buyers are frustrated. They are bidding on multiple properties and never winning,” Guerra said.

Those frustrated folks aren't selling their own homes, which further contributes to the tightening inventory: “It's almost a self-creating situation,” he said.

The intense demand and low inventory are a “hangover from recession” – new jobs aren't being created at a fast enough pace to encourage people to move, he added.

Prices rose for all types of homes and in nearly every section of the borough, the report showed.

For instance, the median sales price for condos in new developments rose 30.1% to $704,918. And the median sales price for brownstones in the Brownstone Belt rose 21.7% to $1.6 million.

Elliman brokers did deals at record prices in Bedford-Stuyvesant, where single-family 7 Arlington Place sold for $1.7 million in May, and in Bushwick, where 3-family 978 Bushwick Ave. is in contract for $1.255 million. The Bushwick home's listing price was $1.195 million.

Meanwhile, the median rent in north and northwest Brooklyn increased 13.5% to $2,737 for the month of June, Elliman's second market report indicated. The figures include new rental deals of market-rate studios through three-bedroom apartments.

“Rents are rising because people can't transition into buying,” said Jonathan Miller, CEO of Miller Samuel Inc., who prepared the market reports.

“Brooklyn is no longer the stepchild of the Manhattan market,” Miller said. “People are going to Brooklyn first. That keeps the pressure on rents.”

The two reports are available at http://www.elliman.com/marketreports.

 7 Arlington Place was used by Spike Lee in his move “Crooklyn” and is a 1-family that sold in late May for $1.7M. a record single family in Bed-Stuy.

168 Lafayette is a 2-family in Ft. Greene that is in contract and will close in late August at $3.2M.
   

July 11, 2013 - 10:00am


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