July 11 (Bloomberg) -- Home prices in Brooklyn, New York’s most populous borough, surged to a record as low interest rates and rising rents across the city swelled demand for homeownership amid a dwindling supply of properties for sale.
The median price of condominiums, co-ops and one- to three-family homes that sold in the second quarter was $550,000, up 15 percent from a year earlier and the highest in more than a decade of record keeping, New York-based appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report today. The inventory of listings fell 19 percent to 4,704, the lowest for a second quarter since Miller Samuel began tracking the data in 2008, said Jonathan Miller, the firm’s president.
“You choke off supply, you have a slowly improving economy, and prices rise,” Miller said. “And then you compound it by widening your source of demand, when one of your competitors -- Manhattan -- is experiencing the same inventory problem.”
Rent gains across New York coupled with mortgage rates at historical lows have helped push buyers into a sales market that’s more affordable than Manhattan’s, while owners are still holding back from listing their properties. Homeowners who bought during the previous peak, when Brooklyn prices hit a median of $540,000 in 2007, still don’t have the equity to sell and come up with a down payment for something new, Miller said.
“You’re not under duress, you didn’t lose your job, you just can’t make the move, so what do you do? Nothing,” Miller said. “You just sit and wait for the market to improve.”
Apartment rents in Brooklyn have also accelerated, jumping 14 percent in June from a year earlier to a median of $2,737, the highest in records dating to 2008, Miller Samuel and Douglas Elliman said in a separate report today. In Manhattan, rents climbed 1.9 percent last month to $3,195, putting them 2.1 percent from the previous peak reached at the end of 2006.
The Manhattan vacancy rate was 1.13 percent, down from 1.41 percent in the first quarter, brokerage Citi Habitats said in a report today.
Justin Lang, whose lease on a co-op in Manhattan’s Soho neighborhood expires next month, anticipated that the owner would raise his rent. The landlord’s real estate agent, Brandon Bogard of Douglas Elliman, confirmed his hunch, so Lang hired Bogard for a different task: to help him find an apartment to buy in Brooklyn.
The search -- for a condominium in Williamsburg priced at less than $650,000 -- started in February amid heavy competition.
“At one open house on a weekend, it literally looked like a tour bus just unloaded in front of the place,” said Lang, a 29-year-old lawyer. “There were 30 or 40 people milling about.”
After two months of looking, Lang and his wife concluded they were priced out of Williamsburg. They started looking in nearby Greenpoint, which is less expensive, while still increasing their budget.
On a Friday morning, they offered $690,000 for a one-bedroom apartment on Calyer Street. The owner had been seeking $699,000. By Monday, they increased the bid to $710,000 for the 827-square-foot (77-square-meter) unit, which has a private terrace with a hot tub upstairs from the main apartment.
The couple signed a contract at the end of June and plan to complete the deal in September after getting a mortgage.
“Even at today’s mortgage rates, our monthly payments are $3,300, and we figure we can rent the place out for $3,500 or $3,600 if we left,” said Lang, who works in the New York office of a Canadian law firm. “While we’re living here, it’s like our rent has gone down.”
The average rate for a 30-year mortgage is 4.51 percent, a two-year high, McLean, Virginia-based Freddie Mac said today. While that’s up from a near-record low of 3.35 percent in early May, it’s still well below the average of about 5.3 percent for the past 10 years, according to data compiled by Bloomberg.
In Brooklyn’s Williamsburg and Greenpoint neighborhoods, the median home price jumped 24 percent in the second quarter from a year earlier to $716,011, Miller Samuel and Douglas Elliman said. With little to buy in those areas, the number of sales dropped 6.4 percent to 205 deals.
In northwest Brooklyn, including neighborhoods such as Park Slope and Carroll Gardens, the median price for one- to three-family homes climbed 22 percent to $1.6 million, the firms said.
Properties in borough spent an average of 146 days on the market in the second quarter, down 8.2 percent from a year earlier, according to Miller Samuel and Douglas Elliman. The absorption rate, or the amount of time it would take to sell all the listed homes at the current pace of deals, was 7.6 months, the second fastest in five years of record keeping. The fastest was in the first quarter, at 6.2 months.
New York City added 66,100 jobs in the 12 months through May and the unemployment rate slipped to 8.3 percent, the lowest since 2009, state Labor Department data show.
The supply of homes on the market will remain tight until the job market improves more dramatically, creating incentives for people to move or upgrade their living space, said Michael Guerra, the Douglas Elliman executive vice president who oversees Brooklyn sales.
“We have fewer people choosing to move because we have less job mobility than we had pre-recession,” Guerra said. “So if you didn’t get a new job or promotion, you’re going to stay put and you don’t list your property.”
In Queens, the median sale price climbed 9.9 percent from a year earlier to $390,000, Miller Samuel and Douglas Elliman said in another report today. Inventory plunged 29 percent to 6,225 homes on the market, while deals increased 8.1 percent to 2,493.
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