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A Brooklyn, 2 bedroom luxury condominium cost $350,000 in 2004. The same exact apartment cost $725,000 in 2007. That's more then a 100% price increase. I don't know about you but I haven't seen too many salaries double in the same period and I haven't heard the news of Brooklyn becoming the hottest place for millionaires. I'd call that a speculative bubble, blown up by low interest rates, forged or non-existent credit checks, and real estate agents fanning the flames for a 3% cut of someone's borrowed money. Maybe if the commission was paid out at the same rate as the mortgage we'd have a bit less of this fake cheerleading.

Let's see what the prices are like when buyers don't have Other People's Money, ie low interest mortgages to throw around. I'm already seeing some 2-bdrm asking prices dropping from $550K to 450K-$475K. - Wed Aug 20 2008, 19:38

A lot of the construction is financed by small time groups of people. Unlike a large company such as Hovnanian that needs to turn around projects quickly for cashflow, these guys are individuals prone to the "stickiness" of the real estate market. IE they will wait around forever before dropping prices because they don't want to admit they missed the top of the bubble. Same psychological stance as stock market investors who often hang on to loosing stocks because they don't want the pain of admitting a loss.

This means that it will probably take a while for the prices to drop but the price drops will be led by the larger condo builders who can't afford to be paying mortgages for empty condos and need a quick turn around. - Fri May 30 2008, 08:21

Mike I think you may have misunderstood the tongue-in-cheek sarcasm of that post.

Brooklyn and to a lesser extent Manhattan real estate is significantly overvalued. I cannot imagine any long-term demographic reasons for the near doubling of real estate prices in the span of 2-3 years (2003-2005). In my own experience there has been an undeniable rise in demand in that time mostly due to cheap loans, loose lending practices and constant real estate agent cheerleading. I believe we are now returning to stricter lending practices which will greatly lower the pool of available buyers.

I understand that it is in every agent's interests to promote and even create demand through psychological means including advertisements, and posts on this website. I have yet to see a single real estate agent to ever admit that there are good and bad times to buy property. For some reason no matter what's happening it's always great, great, buy, buy, buy. - Fri Apr 25 2008, 18:17

As a qualified Real Estate professional I have to make sure that only positive comments are accepted to this question. Otherwise, some impressionable buyers might think that paying half a million for a condo in an area with a 35K median salary may be just a tad too much. We wouldn't want crazy ideas like that floating around. Who knows they might check the historical prices and see that a condo which cost 350K in 2003 for some magical reason is now selling for $600K. We'll have to attribute it to all those foreign buyers pouring money into the deep corners of Brooklyn.

So basically any time is the best time to buy and/or sell, so long as I get the comission. If you see something you like you should definitely borrow more then you can afford and pay more then it's worth. After all, the higher the price, the higher the commision ! So raise the roof with the prices. Buy, buy buy!

You're putting my kids through college :) - Thu Apr 24 2008, 12:54

If you look at the Brooklyn condo prices from 2003 to 2006/7 you can see that prices almost doubled. Now I don't know about you but I don't think a lot of people had their salaries double in order to be able to afford these properties. The price increase, as in other parts of the country, was fueled by low interest loans that were given out to unqualified borrowers. It's not too hard to pay huge amounts for questionable real estate if the money you are using is borrowed.

In my view what we are having right now is a reset to the historically average rate of growth we saw before the 2003 boom, adjusted for inflation of course. As an example a 2 bedroom condo in south brooklyn which cost around 350K in 2003 should now be fairly priced around 400-450K, not 600-700K as it often is.

You may have to wait longer for prices to return to their mean levels. Due to psychological reasons, prices are sticky on the way down. This means that most people will hold on to losses rather then admitting that they made a bad investment and cut their losses. You may do better with new condo builders who have cashflow to think about and are therefore a lot less emotional. If their carrying costs rise too much, expect to see much steeper drops. - Thu Mar 6 2008, 07:23