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Alexa Tietjen Dornagon is the founder and editor of Court Street Journal, a blog exploring the vibrant people, places and culture of West Brooklyn. CSJ is about life in progress, told through original reporting and illustration.<\/p>\n
News from the neighborhood.<\/p>\n
Red Hook & Gowanus\n <\/p>\n
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A look at the forces shaping the real estate market and what it means for everyone trying to live here.<\/p>\n
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The stretch of neighborhoods west of Park Slope, from Red Hook to Dumbo, has become one of the most sought-after pockets of New York City. Tree-lined streets, majestic brownstones, great restaurants, an easy commute into Manhattan\u2014it\u2019s no wonder rents keep climbing and buying an apartment, never mind a brownstone, feels aspirational.<\/p>\n
It wasn\u2019t always this way
This part of Brooklyn looked very different in the \u201870s. Buildings were in disrepair, property values had cratered, and the city was on its way to losing nearly a million residents. \u201cThere was this initial wave of brownstoners, the people who came in the \u201850s, \u201860s and \u201870s who were buying these old, beautiful historic homes that in many cases were a bit run down, needed work, and restoring them lovingly, creating the brownstone neighborhoods that we know today,\u201d says Lara Birnback, executive director of the Brooklyn Heights Association. \u201cThat initial wave of people were very civically inclined. Other people might say that\u2019s really just gentrification with a glossier frame on it.\u201d<\/p>\n
Fast forward to today and those same brownstones that once required a leap of faith to buy are now among the most coveted, and expensive, properties in the city. A Carroll Gardens townhouse just went into contract for $8.3 million. Franco Hasou, a broker at boutique firm In the Heights Real Estate and a Carroll Gardens resident, says he\u2019s constantly fielding calls from developers. \u201cIn the last three weeks, I\u2019ve had ten developers call me asking for buildings,\u201d he says. \u201cThey\u2019ll pay cash right away and close as soon as possible. They\u2019re begging.\u201d<\/p>\n
Why prices keep going up
Hasou has a simple explanation for what\u2019s driving price increases: \u201cLimited supply, more demand. That\u2019s what\u2019s been happening for a number of years in this neighborhood, and it\u2019ll never really go down.\u201d The area is bound by water\u2014the East River to the west and the Gowanus Canal to the southeast\u2014which means opportunities to build are limited.\u00a0<\/p>\n
Zoning caps heights, landmark rules limit alterations, and even the most modest of renovations are complex. \u201cThe architectural and permitting costs just to do $50,000 worth of work is almost $20,000,\u201d Hasou says. \u201cNo regular person can walk in here and decide they\u2019re going to just buy a place and renovate. There\u2019s no way.\u201d<\/p>\n
Unable to keep up with rising renovation costs and city directives, some owners are simply \u201csick and tired,\u201d Hasou says, and willing to sell to the highest bidder. \u201cThe city comes along and says, \u2018You got to do lead abatement, asbestos abatement. By the way, you can\u2019t raise rents and your property tax went up. Tenants complain, there are violations they have to fix, and they\u2019re like, \u2018Who can give me the money the fastest?\u2019 A developer comes along and says, \u2018Here, have $5.5 million.\u2019\u201d\u00a0<\/p>\n
Developers often end up converting multi-unit buildings into single- or two-family homes in order to make a proper return on their investment, further consolidating rental opportunities and overall available housing.\u00a0<\/p>\n
So who is buying?
Growing Manhattan families have long seen Brooklyn as a place where they can get more bang for their buck and achieve a more suburban feel without actually leaving the city. \u201cThey\u2019re not wanting to go out into the suburbs and have the white picket fence. They still want diversity; they want their kids to grow up in an urban environment. Brooklyn is the best of both worlds,\u201d says Alexandra Gupta, a real estate agent at The Corcoran Group who grew up in Boerum Hill.\u00a0<\/p>\n
Gupta has observed two main buying trends recently. The first is an influx of investor-buyers, though not the corporate kind. \u201cInvestors are mostly families who are seeing what\u2019s happening in the area and using their inheritance or their savings to purchase real estate because they\u2019ve seen the growth,\u201d Gupta says.The second is co-purchasing: Two families pool their assets together to buy a brownstone. They split it into two units\u2014one garden, one roof\u2014and share expenses.<\/p>\n
Gupta has also seen buyers work creatively within existing zoning and building rules by adding subterranean levels. \u201cIn most of these brownstone neighborhoods, there\u2019s usually landmarks or rules against building up or out. So you build down,\u201d she says. \u201cPeople have been turning [lower levels] into a basketball court, wine cellars, gyms, parking garages. Digging down is a trend.\u201d<\/p>\n
The kind of buyer who can afford to do this (many of whom are from overseas) has caught even seasoned brokers off guard. \u201cThat\u2019s something I\u2019ve never seen before\u2014the money,\u201d Gupta says. And where is it coming from? Finance, tech, law, and increasingly, family wealth. \u201cThe transfer of wealth is happening,\u201d Gupta says. \u201cA lot of folks are just outright paying cash\u2014parents paying cash, families using their trust fund money.\u201d<\/p>\n
The K-Shaped market
The K-shaped economy\u2014a post-pandemic economic split in which some households have thrived while others have fallen further behind\u2014is playing out in real time on these streets. Mortgage rates, which dipped to 2.98% in 2020, now hover around 6.6% what Maggie Ross, senior managing director of sales for Brooklyn at Brown Harris Stevens, calls \u201ca complete tectonic shift\u201d and \u201ca huge driver of the change in purchasability.\u201d The effect is a market frozen in place: Owners who locked in low rates won\u2019t sell and give them up, so inventory stays thin and prices stay high. \u201cWe have low inventory because a lot of people are holding on to their 3% mortgage interest rates and simply not moving,\u201d Ross says. \u201cThere\u2019s also general economic uncertainty. In this micro-market, cash buyers are finding it much easier to enter.\u201d<\/p>\n
Those cash buyers aren\u2019t always who you\u2019d expect. \u201cI\u2019ve met a lot of union workers who work for the city or the government, who make $400,000 a year between them and their wife, and own $2 million properties,\u201d says Hasou from In the Heights. Most of his clients, he notes, aren\u2019t financing at all. \u201cMost of the people that we sell to have the cash in the bank. They don\u2019t borrow money.\u201d<\/p>\n
For everyone else\u2014the renter saving for a down payment, the first-time buyer watching rates\u2014the math is brutal. Ross puts it plainly: \u201cPeople who are cash buyers and have more liquid assets have an easier time purchasing.\u201d The gap between those two realities is what defines this market right now.<\/p>\n
How to prepare to buy
This is a market shaped by geographic constraint, regulatory complexity, and an influx of wealth that shows no signs of slowing. For would-be buyers, Ross recommends going in prepared: get your broker, your lawyer, and your financing lined up before you find the property you want. In a low-inventory market, the first serious buyer often wins. Co-ops and condos, often overlooked in favor of the brownstone dream, offer the same tree-lined streets and community at a lower entry point\u2014and in this market, they\u2019re worth a serious look.<\/p>\n
For renters, the landscape is harder. As long as developers keep converting multi-family buildings and landlords keep selling, the rental supply will continue to shrink and prices will continue to climb. What changes that pattern, and when, is the question everyone is asking and no one can answer.\u00a0<\/p>\n
Want more coverage of the neighborhoods you call home? Subscribe to Court Street Journal <\/a>on Substack.<\/p>\n Alexa Tietjen Dornagon is the founder and editor of Court Street Journal, a blog exploring the vibrant people, places and culture of West Brooklyn. CSJ is about life in progress, told through original reporting and illustration.<\/p>\n <\/p>\n