In the final quarter of 2012, buyers were hungry for housing in Brooklyn, but they quickly discovered there wasn’t much on the market.
The resulting collision of unusually strong demand and a relatively thin supply of apartments and houses sent median prices up strongly in the final quarter over year-earlier levels, according to reports from several brokerages released on Thursday. Prices also notched up in Queens, though inventory was not quite as thin there.
“Inventory is down across the board [in Brooklyn] and you’re seeing number of sales down across the board,” said Michael Guerra, Brooklyn managing director at Douglas Elliman. “I think we’re going to see that continue to be the case moving into 2013.”
The fourth-quarter Elliman report for Brooklyn housing sales showed a 21% drop in listing inventory from year-earlier levels. The median sales price rose 13% to $512,000. In Queens, inventory fell by a mere 0.6%, but median prices still rose by 14% to $390,000.
Overall, sales in the quarter decreased, despite a spike in December activity from sellers wanting to close deals ahead of 2013’s increased capital gains tax, Mr. Guerra said.
“Some of those deals would have been counting in Q1,” Mr. Guerra said. “We don’t have a lot of inventory, so it’s not like we’re going to make it up.”
Inventories in Brooklyn for the fourth quarter of 2012 were the lowest they’ve been in the five years Miller Samuel CEO Jonathan Miller has been tracking them for the Elliman report. In Brooklyn, the average listing discount, the difference between asking prices and accepted offers, was also the smallest in five years at 1.5%, demonstrating how much power sellers have in the current market.
“Buyers are realizing that sellers have a little bit more of the upper hand,” Mr. Miller said. Unusually large crowds showing up at open houses might be clueing those buyers in to just how strong demand is, brokerage executives said. On Sunday, a Corcoran broker in the Fort Greene/Bedford-Stuyvesant area of Brooklyn had three open houses, garnering a total of 275 visitors and 50 bids, according to Frank Percesepe, the firm’s regional senior vice president for Brooklyn. Those numbers would be high for any time of year, but they are particularly notable in January, traditionally a slow month for residential sales. Corcoran reported a 16% year-over-year increase in sales prices for Brooklyn.
“All of a sudden, it’s like the floodgates have opened,” Mr. Percesepe said.
Mr. Guerra reported a similar story, with 120 people turning out to look at a townhouse. Brokers would usually expect to see no more than 12 potential buyers at such an event in January, he said.
“I’ve never seen this volume of buyer activity in January,” Mr. Guerra said.
Inventory isn’t likely to grow any time soon, according to Greg Heym, chief economist at Brown Harris Stevens, another brokerage that saw year-over-year median price increases in most Brooklyn neighborhoods. Mr. Heym pointed out that little new development appears to be coming down the pike. He has been tracking building permits through census data, which for 2012 is available through November and shows 2,847permits for new units in Brooklyn. In 2007, that number was 12,744.
“It just leads you to expect that you’re going to see continued strength in the Brooklyn market, and you really need development to keep up,” Mr. Heym said.