Is Brooklyn Overvalued?

It's been a frustrating time over the last several months for both buyers and renters, with selling prices and rents both increasing and fierce competition for properties. As a result, in many cases (studio apartments, for example), Manhattan prices begin to look good. As an example, while there are 41 apartments in Midtown East listed for $300,000 or less on Streeteasy as of today, there are only 22 in the Brooklyn neighborhoods closest to Manhattan (Williamsburg, Greenpoint, DUMBO, Brooklyn Heights, Downtown Brooklyn, Cobble Hill, Boerum Hill, and Carroll Gardens). One recent studio listing at One Hanson Place received five offers before the first open house, all but one at or over the asking price of $439,000. Four more offers came after the open house and the property sold for $450,000. There were offers as high as $500,000, but the seller decided to accept an all-cash offer instead.

It's a simple question of supply and demand. As Brooklyn has become the destination of choice for more and more people, obviously demand for housing has gone up. However, many of these neighborhoods are insulated from new construction by virtue of their being designated historic districts, preventing supply from keeping up, and pushing prices ever higher. The midtown Manhattan neighborhoods of Murray Hill and Gramercy, however, are full of high-rise apartment houses, and Manhattan's more transient population ensures a steady stream of resales.

Many aspects to Brooklyn, however, make it still a good value. Square footage on most places is larger than that of the "Murphy bed specials" that make up most of these Manhattan studio listings, and the character and beauty of these land marked areas is a sharp contrast (for me) to the relative soullessness of those Manhattan neighborhoods, as well as the boring architecture of most of the post-war buildings there. However, some people will always prefer a 10-minute walk to the office over all the charm in the world. That's why all of NYC is so wonderful - there is something for everyone.

The fact that fewer and fewer people are relying on a daily commute to Manhattan also bodes well for price appreciation in farther-out neighborhoods. In short, I think Brooklyn properties will hold their values and even continue to appreciate, with even higher growth potential four subway stops or more from Manhattan.