Prudential Douglas Elliman Brooklyn Market Overview Q2 2009

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Prices and number of sales fell below levels of last year

Number of sales jumped from prior quarter, but remained below prior year levels

(NEW YORK, NY) -- There were 1,428 sales in the second quarter, 29.7% below the 2,031 sales in the prior year quarter. Sales jumped, however, 20.4% from the prior quarter total of 1,186 sales, recovering a portion of the sharp decline in the prior quarter. The increase was greater than the normal seasonal change from first to second quarter, which has averaged 1.7% since 2003. There would appear to be a release in pent-up demand since change in the number of sales between the most recent fourth and first quarters fell 35.8% in contrast to a 5.8% average decline over the past six years. There were 6,330 properties listed for sale, up 4.9% from 6,037 units in the prior year quarter.

Price indicators showed consistent decline

The average sales price of a Brooklyn property was $495,120, 15.9% below the $588,441 average sales price of the prior year quarter. Median sales price was $441,090, 16% below the $525,000 result of the prior year quarter. The similarity in trend reflects the lack of skew caused by higher end properties. When median sales price is categorized by new development and re-sale properties, the decline is also consistent over the same period with 12.5% and 17.3% declines respectively. The influence of new development sales has been weakening over the past year. Market share of new development sales was 12.9% of all sales in the second quarter, down from 17.9% in the same period last year.

All property types and regions showed decline in number of sales and price indicators

The median sales price of condos, co-ops, 1-3 family houses and luxury properties declined 7.7%, 2.2%, 12.5% and 18% from the same period last year, respectively. Co-ops continue to show the least volatility in prices. Condos showed a 7.9% decline in market share from the prior year quarter, largely due to the lower level of new development sales. Co-ops were the beneficiary, gaining 8.3% in market share over the same period. The four Brooklyn market regions in this report: North, Northwest, South and East, all showed a decline in median sales price and number of sales. North Brooklyn, which is comprised of 83% condo sales, saw the smallest year over year decline in median sales price at 8.6% and the second largest decline in the number of sales at 23%. This is consistent with the high market share of new development activity, that generally lags market conditions by more than a year and tends to be less responsive to declining market conditions than re-sales. East Brooklyn, which has the highest concentration of foreclosure activity, saw the largest decline in median sales price at 18.3% and the largest decline in number of sales at 39.6%.

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Condo Market
Re-sale prices stabilized, as new development prices declined

Days on market stabilized as listing discount expanded

Condo sales took an average of 162 days to sell, down 3 days from 165 days on market in the prior year quarter. Listing discount roughly doubled to 7% from 3.4% in the prior year quarter. Median sales price declined 7.7% to $475,283 from $514,725 in the same period last year. The decline was attributable to condo new development activity, which posted a 15.2% decline in median sales price over the same period compared to a 1.9% increase in re-sale median sales price. Market share for the two property types remained generally consistent over the period with a second quarter 50.5% re-sale market share compared to a 49.5% new development market share for condo sales in Brooklyn.

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Co-Op Market
Number of sales jumped as price indicators slipped

Number of sales increased from prior year and prior quarter

There were 340 co-op sales in the current quarter, up 8.3% from 314 sales in the prior year quarter and up 34.9% from 252 sales in the prior quarter. The jump in sales activity was in sharp contrast to the 46.1% decline in condo sales from the prior year quarter. Median sales price slipped 2.2% to $249,500 from $255,000 in the prior year quarter. The increase in the number of sales and modest decline in price indicators was attributable to the increase in first time buyers during the quarter who took advantage of mortgage rates slipping to historic lows.

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1-3 Family Market
Price indicators and number of sales declined

Market share stabilized as number of sales declined

Sales of 1-3 family properties comprise the largest segment of the Brooklyn market, comprising 50.1% of sales, roughly the same as the 50.6% market share at this time last year. This stability occurred despite a 30.3% decline in the number of sales to 716 from 1,027 sales in the prior year quarter. Median sales price was $520,000 in the second quarter, down 12.5% from the $594,000 median sales price of the prior year quarter. Listing discount returned to a more modest 4.3% indicator after spiking in the prior quarter to 9.4%. Days on market expanded to 141 days from 127 days over the same period.

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Luxury Market
Largest decline in price indicators of all property types

Days on market and listing discount expanded

The median sales price of a luxury property was $983,622 in the second quarter, 18% below the $1,200,000 of the prior year quarter and it is the first time this indicator fell below $1,000,000 in several years. Median sales price peaked in the third quarter of 2008 at $1,210,000. Average sales price and price per square foot had similar declines of 14.9% and 18.9% over the year, respectively. Days on market expanded by more than two weeks to 155 days from 140 days in the prior year quarter. Listing discount more than doubled over the same period to 7.6% from 3.4%.

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North Market
Price indicators and number of sales declined

Condos continued to dominate property sales

While the number of sales fell 23% to 94 units from 122 units in the prior year quarter, condos continue to dominate the residential housing market, comprising 83% of all North Brooklyn sales, similar to the 82% market share of the prior year quarter. Median sales price of fell 8.6% to $530,658 from $580,402 in the prior year quarter. The average sales price fell 15.4% to $561,596 from $663,946 in the same period last year. Price per square foot saw a more modest decline of 5% to $423 per square foot, from $445 per square foot in the prior year quarter. The average price per square foot of a condo closed at $516 in the second quarter, down 22.8% from $668 in the prior year quarter. The decline in these price indicators is consistent with the 22.9% decline in the average size of a property that sold during the quarter to 1,361 square feet. This trend was consistent across each of the five quintiles based on median sales price.

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South Market
Co-ops and condos showed price stability

Price indicators mixed as number of sales declined

While median sales price showed a 14.6% decline to $407,810 from $477,500 in the prior year quarter, the condo and co-op sub markets showed increases in the same metric over the same period. The median sales price of a condo was nominally higher at 0.1% over the same period, while the median sales price of a co-op apartment increased 3.6% to $204,900 from $197,730 in the prior year quarter. There were 846 sales during the period, down 21.6% from 1,079 in the same period last year, but like all regions, South Brooklyn saw a larger than normal 21.7% uptick from the prior quarter total of 695 sales. Despite the decline in number of sales as compared to the prior year quarter, market share of South Brooklyn grew to 59.2% of all sales in the borough, up from 53.1% in the same period last year. The region had the lowest median sales price this quarter, edging out East Brooklyn as buyers took advantage of lower housing prices and mortgage rates at historic lows.

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East Market
Continued decline in number of sales and price indicators

Number of sales largest decline of all regions, but seasonal uptick apparent

There were 243 sales in the quarter, 39.6% below the 402 sales in the prior year quarter. However, there was a seasonal 3.8% uptick to 243 sales from 234 sales in the prior quarter. The overall price indicators showed a consistent rate of decline. Median sales price was $408,213 in the second quarter, down 18.3% from the $499,902 median sales price of the same period last year. Average sales price was $416,847, 16.8% below the $500,925 average sales price of the prior year quarter. All but the first quintile posted double-digit declines in median sales price as compared to the prior year quarter. The first quintile slipped 4.7% to a $192,660 median sales price as compared to the same period last year.

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Northwest Market
Price indicators declined as co-op market share expanded

Number of sales declined

There were 245 sales in the current quarter, down 42.8% from 428 sales during the same period last year, but jumped 41.6% from 173 units in the prior quarter. The surge in the number of sales from the prior quarter was greater than a typical seasonal increase and was likely caused by the release of pent-up demand since the end of 2008. Co-op sales increased 18.5% to 109 apartments from 92 apartments in the prior year quarter. The number of sales for condos and 1-3 family properties declined 65.8% and 32.8% respectively over the same period. The increase in co-op sales activity resulted in a 44.5% market share for co-op apartments, more than double the market share of the same period a year ago. Market share for the region was 17.2% in the second quarter, down from 21.1% in the prior year quarter.

Price indicators showed decline

The median sales price for a Northwest Brooklyn property was $580,000, down 13.8% from the prior year quarter median sales price of $673,101. Average sales price showed the same pattern, declining 17.9% to $674,063 from $820,693 in the prior year quarter.

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Brownstone Market
Number of sales and price indicators declined

Number of sales declined from prior year, jumped from prior quarter

There were 43 sales in the second quarter, 32.8% below the 64 sales in the prior year quarter, but 34.4% higher than the prior quarter. An uptick in the number of sales was seen in most Brooklyn housing markets as compared to the prior quarter. The gain was higher than seasonal norms, attributable to a release of pent-up demand from the limited activity seen since the fall market.

Price indicators down

Average sales price was $1,100,792, down 18% from the $1,342,056 average sales price of the prior year quarter. Price per square foot declined 16.4% to $408 from $488 in the prior year quarter. The median sales price of a brownstone property was $980,000, down 18.3% from the $1,200,000 median sales price of the prior year quarter. Approximately 70% of brownstone sales were two-family properties and had a median sales price of $965,000, up 4.6% from $922,619 in the same period last year. The 1-family and 3-family market segments had 7 and 6 sales respectively, resulting in excess volatility of the price trends.

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