Brooklyn Brownstone Sales ‘Sort of Pre-Lehman’

Sellers of top-end brownstones, take heart! Brooklyn’s second-quarter housing numbers came out this morning, and we chatted with market wizard

Sellers of top-end brownstones, take heart! Brooklyn’s second-quarter housing numbers came out this morning, and we chatted with market wizard Jonathan Miller, CEO and president of Miller Samuel and author of the Prudential Douglas Elliman (DOUG)’s report, to get the full story on brownstones. The news isn’t bad, which these days means it’s good.

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For “Brownstone Brooklyn,” which encompasses the northwest neighborhoods (Boerum Hill, Brooklyn Heights, Carroll Gardens, Clinton Hill, Cobble Hill, Fort Greene, Park Slope, Prospect Heights and others), high-end brownstones (single-family residences) dominated demand. The median price of those buildings rose to $2.25 million, a 77.2 percent increase from last quarter’s $1.27 million and a 181.3 percent increase from the same time in 2009. The average sales price of all types of brownstones was $1,393,216, down 1.2 percent from last quarter’s $1,410,818, but up 26.6 percent from last year.

Even if this seems like a boom, it isn’t. We’re simply working our way back to how things used to be in the most chi-chi of chi-chi Brooklyn.

“This is clearly good news and we’ll take it, but the story is it’s really getting back to a—and I hate using the word ‘normal’—but more of a level of activity that’s consistent with historic patterns,” Mr. Miller said. “Sort of pre-Lehman.”

Two more notes of caution: First, the stock of brownstones is small and fixed. People don’t build brownstones, just buy and sell them. So if the percent changes seem big, that’s just because we don’t have a whole lot to work with. The total number of brownstone sales this quarter was just 84, which is up 21.7 percent from last quarter’s 69, and up 95.3 percent from the 43 sold in the second quarter last year.

Next, the higher price at the top-end mostly just reflects an increase in the size of units sold, a caveat that’s reminiscent of Manhattan’s second-quarter trend. Mr. Miller gave us some numbers that don’t appear in the report: The average square footage of units sold this quarter was 3,016. Last year it was 2,698. That’s an increase of 11.8 percent. The price per square foot, a truer indicator of demand, has been more or less flat: This quarter it was $462, not that much higher than last year’s $408.

But don’t let that get you down! The share of brownstones in the total Brooklyn sales market was 4.4 percent, whereas last year it was around 3 percent. That percentage seems small, but before 2009 it hovered around 2 percent, Mr. Miller said. Our economic woes aren’t over, but buyers are definitely loving brownstones.

“The increase we saw in this quarter was the release of pent-up demand,” Mr. Miller said.

So what’s in store for the future? As always, that’s hard to say. Things got especially complicated this quarter because of the federal tax credit incentive program: Buyers got tax breaks of $6,500 if they went to contract by April 30. That meant some buyers were “poached from the future,” to use Mr. Miller’s phrase, and the first quarter of 2010 saw an artificial spike in activity. The median sales prices for two- and three-family brownstones went down this quarter—two-family was $950,000, down from first quarter’s $1.27 million, and three-family was $1.10 million, down from $1.4875 million—but relative to last year, those prices barely changed at all. Two-family homes last year were $965,000, while three-family homes were $1.0995 million.

Mr. Miller said the tax credit helped, but it’s not a long-term solution. What will really pull housing out of the current rut is the job market. Once employment ticks up, so will housing. “You’re seeing an artificial depression of activity after seeing this artificial stimulus,” Mr. Miller said of the second quarter figures. “After this period is over, will activity return? That’s the trillion-dollar question. I don’t think so. It’s been artificially high and artificially low. So we’ll probably end up in the middle.”

The bar, he said, has been lowered.

“The word ‘recovery,’ I was taught, meant getting better. In the current environment, the current use of it means not getting worse.”

Brooklyn Brownstone Sales ‘Sort of Pre-Lehman’