Brooklyn 'Starter' Homes Scarce as Real Estate Prices Hit New High in Borough

Despite the pandemic — and, actually, because of it — real estate prices in Brooklyn continued their upward climb in 2021, fourth quarter market reports show. Analysts predict a strong sales market in 2022, barring any unexpected calamity such as a global financial crash.

Brooklyn prices have been rising dramatically since 2012, pushing prices up all over the borough. Once plentiful family-sized homes priced at two or three times the annual median household income — such as a $200,000 two-bedroom apartment or $400,000 townhouse — are now largely a thing of the past.

Who is buying has shifted too. In the current pricing landscape, the Brooklyn home buyer is more likely to be someone with a large down payment or a high income or both. Such a list would include buyers who have already bought and sold at least once, especially those who have sold a more expensive place in Manhattan and are moving to Brooklyn. High-wage earners in finance, tech and the arts are another growing group of Brooklyn buyers. Others have inherited money or have family help.

“The median sale price set a record for the sixth time in seven quarters but it’s longer than that,” said Jonathan Miller, president and CEO of appraisal firm Miller Samuel, who prepared Douglas Elliman’s fourth-quarter report. “If you go back to 2015 through today, the path is scattered with record pricing. This has been going on for about five years, pandemic or not — the pandemic did not change the trajectory of the market, which is continuing to rise pretty significantly.”

For the quarter ended December 31, the average closed sale price reached $1,178,237, an increase of 11.7 percent vs. the year earlier, according to Douglas Elliman. The median was $941,000, up 7.5 percent. One- to three-family townhouses were especially in demand, ending the quarter with an average price per square foot of $652, a 4.8 percent gain over the same period a year earlier. A fifth of sales sold above ask.

Brooklyn attracts a greater number of higher earners in finance and tech than it once did, and it’s a global brand that has become a destination and attracts more people who otherwise would have gone to Manhattan, said Miller.

“Lack of affordability is pushing [prices] outward so in neighborhoods like Midwood all of a sudden there’s a different price dynamic,” he said. Ten years ago, in the fourth quarter of 2011, the median for all kinds of homes in the borough was $454,380, slightly less than half the median today.

“We see these record amounts of deals at time when Omicron is surging and the city’s economy is lagging the rest of the economy,” said Gregory Heym, chief economist for Terra Holdings, the parent company of Brown Harris Stevens. “I think people have faith the city will come out strong. The thing about Brooklyn is they’ve been going strong for well over a year now, they didn’t suffer as much as Manhattan did. A lot of people left Manhattan for Brooklyn and other boroughs to escape some of the density and being around crowds of people. The appeal of Brooklyn has always been evident and I think the momentum will continue. Especially as the economy continues to recover, it will give a boost to the market.”

Co-op prices dropped in some markets in Brooklyn compared to 2020, when they surged. At the same time, the new-development condo market was strong.

Sales activity in Brooklyn was up 35 percent compared to 2020, according to a report from Brown Harris Stevens, with a record number of signed contracts in the last six months of the year. Overall, apartment prices were up 11 percent in the fourth quarter vs. the same period a year before.

Neighborhoods that had particularly sharp upswings included Park Slope/South Slope/Windsor Terrace, where the average price for homes of all types rose 18 percent compared with the last quarter of 2020, said BHS. The average price rose 20 percent in Williamsburg/Greenpoint. In Bay Ridge/Dyker Heights/Sunset Park, the average price per square foot for a condo jumped 17 percent in 2021, thanks to “strong new development activity,” according to the BHS report.

Bed Stuy, Greenpoint, Brooklyn Heights, Gowanus and Downtown Brooklyn saw some of the largest leaps in median price, according to a report from PropertyShark. In Bed Stuy, the median sale price increased 29 percent to $888,000, due in part to sales at new-construction condo buildings.

“One year ago the market was going gangbusters,” said Heym. “People were escaping Manhattan for Brooklyn and pushed prices up. I think the momentum is going to continue. Once the economy is helping us and not hurting us and as tourists come back to the city it really will give us a good push.”

Federal funding, a new mayor, MTA upgrades and quality of life improvements are all positive signs, and even mortgage rates, while rising, will stay affordable, he continued. “I think 2022 will be anther good year.”