2008 Brooklyn home prices rose slightly in an otherwise dismal year

The year 2008 saw average Brooklyn home prices inch up a mere 2 percent in an otherwise bleak landscape as sales volume dropped by one third, with no signs of picking up in the coming months. This was the conclusion of a year-end market report we recently conducted as part of our ongoing series of quarterly market reports on Brooklyn real estate. The statistics we see coming out of these market reports are no surprise, but they are sobering nonetheless. We are now seeing a very pronounced continuation of a trend that surfaced in the third quarter of last year - and even earlier - but has grown deeper, with more inventory sitting on the market and not moving for longer periods of time. Looking at the fourth quarter numbers separately from the rest of the year, the drop-off in sales volume is even more dramatic. For the fourth quarter, the number of Brooklyn properties sold fell 57 percent to 532 properties, down from 1,250 in the fourth quarter of 2007, according to our study. Likewise, in the fourth quarter the average Brooklyn home price was down 2 percent to $670,000 from the average price of $680,000 in the fourth quarter of 2007. The average home price figures come from HMS's comprehensive quarterly study of 15 representative neighborhoods in Brooklyn and include one-, two-, three-, and four-family homes, condos, and co-ops. The report includes neighborhoods that show both price increases and decreases and are deemed together a fair reflection of what is happening in Brooklyn as a whole. While the average price borough-wide dropped two percent in the fourth quarter, neighborhood by neighborhood sale prices varied. Prices fared well and increased in Brooklyn Heights, Carroll Gardens, Bay Ridge and Sunset Park, but fell in Boerum Hill/Cobble Hill, Crown Heights, and Marine Park. The number of homes sold fell in all 15 neighborhoods, with the biggest drops in Boerum Hill/Cobble Hill, Brooklyn Heights, Clinton Hill, Fort Greene, and Bay Ridge. The picture was much bleaker in some of the Brooklyn neighborhoods not included in the study, such as Bedford-Stuyvesant, East New York, and Brownsville. In these three neighborhoods there were 16 foreclosures among one- to four-family homes in the fourth quarter - one for every five home sales. For the full year 2008 in East New York, as one of the most dire examples, prices for one to four-family homes dropped more than 6 percent from 2007, while the number of such homes sold fell 56 percent. Unfortunately the Brooklyn neighborhoods that are in the weakest economic positions to weather a downturn are getting slammed the hardest as the real estate market continues to slow down. But less-than-stellar news about year-end sales does not necessarily have to translate into all bad news for the year to come. One bright spot in the equation is for buyers who are in a healthy position to make an investment now. The current market does favor buyers with good credit and adequate cash reserves. At this point properties are priced to move, and buyers with good credit and cash on hand will be able to secure financing. Also interest rates are once again at record lows, giving potential buyers even more favorable terms and incentives. It is also important to remember that, as with any downturn in volume or pricing, trends tend to be cyclical and do not last for very long. Should the Brooklyn real estate market continue to decline in the first and second quarters of 2009, the trend will surely reach a turning point and begin to reverse itself. This again makes it an ideal opportunity for those buyers in a position to make purchases in the next couple of months. Stay tuned. Visit www.hmsassociates.net. Sam Heskel is founder and executive vice president of HMS Associates, Brooklyn, N.Y.