According to Bloomberg, home sales in Brooklyn have soared since last year. Yet, the number of homes on the market has declined.
What’s interesting that sales in the Cobble Hill, Dumbo, and Brooklyn Heights neighborhoods doubled year-over-over in the first quarter from 2016 to 2017 while homes sales in Bedford-Stuyvesant, Crown Heights, Lefferts Gardens, and Bushwick increased by just 7 percent. If you’ll recall from your college or high school economics class, when supply falls and demand rises, that leads to a rise in prices. So, naturally, home prices in Brooklyn keep going up and setting new records.
What’s Driving Home Sales in Brooklyn, New York?
Curbed New York reports that Brooklyn home prices have increased for five straight quarters. Prices on apartments set a new record in the second quarter of 2017 with a median price of $795,000. The median sales price for condos is almost at $1 million. For single- to three-family homes, the median is over $1 million. These are some serious property value increases.
That home sales doubled in Brooklyn Heights and Cobble Hill is telling when you consider that these neighborhoods are the richest in Brooklyn. People are buying luxury homes.
But not just luxury homes. Bedford-Stuyvesant, Bushwick, and Lefferts Gardens are some of Brooklyn’s most affordable neighborhoods, and Millennials are just starting to buy their first homes. Those are great neighborhoods for starter homes and is likely the reason home sales are picking up in those neighborhoods.
One of the main drivers of both record home sales and rising sales prices is the new development activity in Brooklyn. There’s a lot of it. Crain’s New York reported that Northern Brooklyn was set to get 22,000 new apartments by 2019. That was in 2015, which means development plans have been in the works for at least a couple of years now. And the 17 percent increase in home sales was almost entirely due to new developments, according to Corcoran’s Inhabit.
Does This Mean Brooklyn Is a Prime Investment Neighborhood?
If you’re wondering whether the hot Brooklyn real estate market is a good investment, it might behoove to discover that the Chinese think so. And I would agree.
There are three reasons I would say investing in Brooklyn real estate in 2017 is a good bet, and it doesn’t have anything to do with following China’s wealthy money. Brooklyn is a good bet for real estate investing because:
- Property prices are still going up. In fact, home prices in Brooklyn grew by 16 percent from 2015 to 2016, according to CNBC. The realistic expectation that home values will appreciate is pretty solid. The market is hot, and Millennials are just beginning their home buying spree.
- Rental prices are increasing. Not only are home sales prices going up, but the price of rentals are also on the increase. With both home sales prices and rental prices increasing, real estate investors can’t go wrong.
- Real estate is still cheaper than Manhattan. While Brooklyn home prices have gone up 25 percent since Q1 2016, they’ve also gone up in Manhattan. Zillow says they’ve gone up 21.2 percent in the last year. And they were already higher in Manhattan than Brooklyn. Will analysts expecting home prices to increase even more in both boroughs, they will still continue to be less expensive in Brooklyn, making it a better place for investors to snag up less expensive properties—especially in lower-priced neighborhoods like Bushwick and Bedford-Stuyvesant.
Another thing to think about is that commercial real estate development in Brooklyn is on the decline as commercial real estate values increase. Just in the last year, commercial real estate prices have gone up 20 percent as commercial sales volume dropped 77 percent. The fact that commercial real estate values are increasing along with home valuations is a good sign for investors. There couldn’t be a better time to invest in Brooklyn commercial or residential real estate.