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Brooklyn Sales, Rents Set Q1 Records in Crazy Tough Market

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We sorta knew this was coming: the Brooklyn sales market continues to go gangbusters. Median sales price reached highest level for a first quarter in six years, says Elliman report preparer Jonathan Miller, while listing inventory is at a six-year low, pushing prices even higher. The median sales prices for luxury developments are at the highest level in the seven years Elliman has been tracking it. Some numbers: median sales price rose 1 percent from Q1 2013 to $520,000 (for luxury developments, it jumped 8 percent to $1,650,000), while the average sales price increased 7.3 percent to $681,182. Listing inventory plummeted a sizable 13.2 percent. The small number of homes available for purchase is made worse by the fact that new development in Kings County is mainly luxury rentals, whereas in Manhattan, new development is mainly luxury condos "I believe inventory levels are chronically low—to the point that it is visibly choking off sales. The number of sales slipped 2.2 percent," Miller says. "It's more severe than Manhattan and Queens." Anecdotal evidence, like from the lines at open houses and the bidding wars over homes, indicate the inventory shortage hasn't yet hit its trough.

Benefitting from that craziness is Queens, which is, according to Miller, "the new Brooklyn." "We are seeing low inventory and a lot more sales, and rising prices," he says. "Part of this, perhaps a large part of it, is because of spillover from Brooklyn. A lack of supply and affordability are pushing buyers to seek out more options." But even there, inventory hit the second-lowest point in the nine years Elliman has tracked it. The luxury median sales price of $940,000 in nine years. As for the regular median sales price, it hit the highest first-quarter total in five years: $370,000, a 5.7 percent spike from this time last year. Meanwhile, the average sales price for Q1 2014 increased 10.3 percent, to $429,544, from a year prior. A surefire sign of activity: the number of sales leaped 32.8 percent, while listing inventory fell 13.5 percent, to 5,617 units.

Let's turn our attention to the rental market in Q1. After all, three-quarters of New Yorkers rent, so these numbers hold meaning for several million people. In Manhattan, year-over-year median rent figures have been declining from August to now, leaving a plateau in the market (albeit, a plateau at a high level) and relatively stable prices. According to Elliman (warning: PDF!), the median Manhattan rent in Q1 was $3,200, a minuscule 0.2 percent uptick from this time last year, but if you take into account landlord concessions, like free months offered, net effective median rent actually dropped since Q1 2013. "Don't expect Manhattan to see sharp declines in near future," Miller says. "Nor to see sharp gains, like Brooklyn, in the near future, either."

Ah, here's where the action is. The Brooklyn rental market continued to get hotter (warning: PDF!) during the first quarter of 2014, with both median and average rental prices setting new records since Elliman began tracking the data in 2008: to $2,900/month (up 13.3 percent from Q1 2013) and $3,254/month (up 9.5 percent from Q1 2013), respectively. The rise in median rent was largest year-over-year increase in 2014 and the 10th consecutive month of year-over-year gains. Remember, these figures are for the areas of north and northwest Brooklyn that Elliman tracks, not for the entire borough. If this isn't a sign of a development boom, we don't know what is: the number of new rentals jumped a whopping 174.6 percent since the same time last year.

"Brooklyn is very highly sought after for newcomers to the city, whether it's for sales or rentals," Miller explains. "And there simply isn't enough inventory. That pushes would-be buyers into rentals and, I think, is holding back a lot more sales activity that would occur otherwise" So with few options to buy, many house-hunters are compelled to turn to the rental market, further intensifying its craziness, because there is a chronic shortage of homes available for purchase.

MNS also has a breakdown of the Brooklyn rental market (as well as Manhattan's) in the first quarter. Key points: While average Brooklyn rents have increased more 6 percent since March of last year (from $2,478 to $2,637), Manhattan rents have eked out a mere 0.76 percent gain (to $3,817) in the same time. Neighborhoods that saw the most drastic increases include Harlem and the East Village, as well as Bed-Stuy, Crown Heights, and Fort Greene. For Brooklyn renters, the news doesn't get better: the low levels of incoming rental inventory, coupled with a busy rental season, will push prices up.

Let's examine another perspective on Brooklyn sales.

Corcoran has also crunched its numbers (warning: PDF!) on first-quarter Brooklyn sales, and here are some highlights. It also saw significant price growth in parts of the borough, but market-wide the median sales price actually dropped 6 percent from the first quarter of last year. The average price per square foot decreased by 5 percent. That first dip marks the first year-over-year decline in average PPSF in seven quarters. The explanation is fairly simple—more sales in lower-priced parts of the borough, the southern and eastern neighborhoods, coupled with low inventory in the more expensive areas of north and northwest Brooklyn. Low inventory means fewer closed sales (10 percent less than Q1 2013 and 7 percent less than Q4 2013), and that results in fewer higher-priced transactions that would push those totals up.

Meanwhile, if you just look at new developments, sales in those showed strong average and median price gains year-over-year—to be precise, "double-digit annual gains took new development prices in Brooklyn to their highest level in over five years." Also expensive: townhouses. The average price of a single-family townhome in Brooklyn was $2.2 million in the first quarter of 2014, up from $1.5 million one year prior. As evidenced by the graphic below, closings on the cheaper end of the spectrum inched higher in Q1, as did the market share of high-end sales in the $1 million and up range.

Let's touch on rentals for another moment. First-quarter rental trends for Manhattan as analyzed by Citi Habitats were along the same lines: average rents are up; vacancies are down. (Insert Bronx and Battery reference here?) From the first quarter of 2013 to the first quarter of this year, the average rent for studio apartments increased 2 percent, for one-bedrooms, 2.8 percent, for two-beds, 4.4 percent, and for 3BRs, 4.6 percent.

Looking back at March alone, though, the average Manhattan apartment rented for $3,402/month, $15 less than February's figure, despite the year-over-year increase. Landlords are using more concessions and move-in incentives to lure renters, which helped fill empty apartments with residents quickly, preventing landlords from lowering rents to attract tenants.

Back to Kings County we go. In a much-talked about report released this week, Brooklyn-focused Ideal Properties Group released its first-ever quarterly assessment of demographics and behaviors of purchasers in the borough, specifically, of one- to three-family townhouses, co-ops, and condos. It has an interesting, if sort of hand-to-forehead, well duh conclusion: People buying in Brooklyn now are a lot richer than the people who bought in Brooklyn at the same time last year. In the first quarter of 2014, the number of people with annual salaries of $300,000 and up who purchased "Brownstone" and North Brooklyn homes increased 316 percent over the same period last year, and 98 percent over the fourth quarter of 2013. What a difference a quarter can make.

The report (warning: PDF!) also contains a lot of data and easy-to-read charts on Park Slope, Brooklyn Heights, Carroll Gardens, Cobble Hill, Prospect Heights, Fort Greene or Williamsburg buyers' ages, genders, professions, motives, neighborhood preferences, down payments, negotiation strategies, bidding wars, and liquidity. Most purchasers lived in Kings County prior to buying a place in the borough, followed by Manhattan. The most out-of-state purchasers hailed from California.

And that's all till next month (or quarter), folks.
· 1Q - 2014 Brooklyn Sales [Elliman Report]
· March - 2014 Manhattan And Brooklyn Rentals [Elliman Report]
· Manhattan Rental Market Report [MNS]
· Brooklyn Rental Market Report [MNS]
· Advice & Reports [Corcoran; PDF]
· Market Reports [Citi Habitats]
· Profile of Home Buyers in Brownstone Brooklyn [Ideal Properties]
· Market Reports archive [Curbed]
· Rental Market Reports archive [Curbed]