Real Estate Crisis Not So Bad in Bay Ridge
October 14, 2008
The streets of Bay Ridge, Brooklyn, a multi-cultural neighborhood with some of the oldest communities of immigrants in the city, are full of houses and buildings that have been owned by the same people for decades. While the entire nation is going through one of its most acute and profound real-estate meltdowns, this little town in the southwest of Brooklyn, not far from Wall Street, is holding up well to the crisis.
In much of the rest of country, homes are losing their values and many homeowners are obliged to sell off their properties, but Bay Ridge, a mainly middle-class neighborhood, has managed to remain a relatively strong market, according to several real-estate and mortgage brokers.
“A majority of homeowners have lived in the area for many years,” said Andrew Lathko, a local real-estate broker. “They don’t mind waiting and they are not desperate to sell. If it means waiting six months, they can do it.”
Even as the sales have declined 30 percent in the past year, real estate prices are up four percent. In contrast, in Brooklyn as a whole, prices are down six percent, according to the Brooklyn Association of Realtors.
The Board of Realtors keeps track of home sales, market fluctuations and home prices in Brooklyn. Executive officer Rich Schulhoff said Bay Ridge was affected like the rest of the country by the economic crisis but that it was doing pretty well on the market. Still, he worries about the dramatic drop in the number of sales.
“There is only one way to bring sales up, and that means homeowners should be ready to drop their prices down,” he said.
John Manning, a mortgage broker, who has owned his company for over 20 years, said that the market remained stable because there was a good borrower base. “If the market is going down is largely due to a lot of people being stubborn,” he said. “This is a high demand area, it’s close to Manhattan, prices are not going to drop quickly but people are waiting for the other shoe to drop.”
Bay Ridge, just like the rest of the nation, is suffering from a huge drop in home sales and the people who are the most affected are homeowners and buyers who are having difficulty getting access to mortgages, since banks in the current crunch are lending only to people with impeccable credit. Moreover, other people are also directly touched by the dramatic drop in sales, people who are involved in the transactions: real-estate and mortgage brokers who have seen their business lose momentum without being able to do anything about it.
According to Lathko and Manning, Bay Ridge remained a relatively solid market but the sales went down partly because fewer people are granted loans.
Lathko acknowledged that the mortgage situation had dramatically changed and that it could explain why the sales had gone down so much. “A big reason this is happening is because the pool of qualified buyers has shrunk tremendously,” he said. “It’s been very quiet lately.”
Manning said that the most significant change was the new requirements to grant loans. “Subprime loans are not granted anymore. Only qualified borrowers can get loans now,” he said. “It has changed a lot in the last year and bad credit doesn’t work anymore.”
According to Manning, many residents of Bay Ridge had lost their jobs or had invested great amounts of money in the stock exchange and had lost a big portion of their savings, which meant that they often did not have the necessary amount of money required for down-payments.
“Just last week a Wall Street broker who lives in Bay Ridge called me and said he had lost 100,000 dollars in the stock exchange and that he could not afford to buy a house anymore,” he said.
The demographics of Bay Ridge largely explained why the market was sustaining itself and why the area was not struck by the crisis as much as the rest of the country, Lathko said.
Tom Maguire, one of the owners of a mortgage company, Maguire Real Estate, in Bay Ridge, said that it was impossible that prices had raised. He estimated the drop in prices to be between 10 and 12 percent. He said that the prices people asked may not have gone down but people have been closing deals on a lot less than what was originally asked. He said that there was a significant difference between how much homeowners asked for and the final selling price. He was skeptical of official numbers that assessed that the prices had gone up.
“The entire country is suffering, why would Bay Ridge be any different?” He said.
A Bay Ridge real-estate appraiser, Paul Marino, agreed with Tom Mcguire and estimated the drop in home prices to be between 7 and 10 percent.
However, Mcguire said that one element that differentiated the Bay Ridge real-estate market to the rest of the country was that the borrowers were not affected by the subprime crisis. “Here, people have good credit, we haven’t had to lower the amount of customers we grant loans to,” he said.
On a more positive note, Mcguire said that things have gotten much better in the last six weeks but he could not explain why. “We have had more business in the last six weeks than we have in the last six months. Maybe people are simply adjusting to the new market,” he said.
“The real-estate market is volatile and it’s impossible to know what’s going to happen next but it’s still a desirable area and an active market,” Manning said.