Thursday, July 10, 2014

This Just In: Bed-Stuy Exists

Since so many folks act like nothing actually happens until it happens in the NYTimes, it's nice to learn this week that Bed-Stuy and Crown Heights now officially exist.  Maybe it's easier for everyone to get their heads around this way.  But some of it still leaves us scratching our heads...

"Until recently, most of the townhouse buyers have been investors, said William Hobbs, a broker-owner of Evans & Nye, which is based in Stuyvesant Heights, one of the neighborhood’s historic districts. The investors have been renovating and flipping the townhouses, or creating apartments and renting them, brokers said. But some townhouses are now exceeding the $2 million mark, which is more than most investors want to spend, Mr. Hobbs said."

If "most of the townhouse buyers have been investors", who were they "renovating and flipping the townhouses" to?  Presumably end-user buyers no?  And if "exceeding the $2 million mark... is more than most investors want to spend" then how come 2 of Bed-Stuy's only $2M+ sales were to investors?

So don't fret if you still don't quite understand Bed-Stuy.  When even the experts and the articles can't quite help but mischaracterize it, well who are you supposed to believe?  They accurately point out, "As recently as two years ago, townhouses were available for $700,000, but now most average about $1.4 million to $1.5 million, Mr. Munsey said."  But that still doesn't stop people with a million dollars cash calling us up every week and telling us they're ready for their first foray into a Bed-Stuy fixer-upper for a million dollars and not a penny more in a prime location.  Heck, some people still think this is the price for Clinton Hill.

"Is Bed-Stuy a bubble?" they keep asking us.  When houses that were $1.6M-$2.4M in Park Slope 2 years ago are worth $2.8M-$4M now, is it okay if Bed-Stuy houses double or triple in value too?  Sure, interest rates are low, but that's a total red herring.  Nobody's actually buying a house because rates are 4.25% instead of 6%.  The fact is that loans are still hard to get.  Regardless of how low rates are, banks still wanna see all up in your guts and aren't handing money out like they were during the real bubble.  So, no, it's not a lending bubble either.  Another major difference between today's perceived bubble and the real bubble of 2006-2008, the rents are there to support these prices.

"Bedford-Stuyvesant also has a vibrant rental market, with many townhouses broken up into apartments, brokers said."  Ok, right again, like any neighborhood in NYC with townhouses.  Today we're taking a look at a sublet that's a bellwether of the rentals in the area, on Hancock between Bedford and Nostrand.  A nice, digestible west Bed-Stuy location even newbies can get their heads around...

Pier mirrors, high ceilings, original parquet floors all on this parlor floor of a Bed-Stuy brownstone 2 bedroom / 2 bath with one room subletting for $1,200/month.  Sure, the pics are also a little dark & dingy, and they didn't quite take time to stage the place or anything.  But in this market, you don't really have to.  Folks running away from the $1,500-$1,800/BR rentals in Fort Greene, Clinton Hill, and Prospect Heights don't oblige.

A pic of the kitchen and bath would be nice, but again, probably not necessary in this market.

Likening Bed-Stuy to Harlem - as the Times piece does - is a handy reference point.  Afterall, similarities abound.  The same guys who did Central Park did Prospect Park.  The same people who stand on "the good side" of Central Park and refuse to go any further are shocked at the pricing on the "bad side" of Central Park, and guess what?  Same goes for Prospect Park.  Think of Park Slope and Prospect Heights as the Upper East Side and the Upper West Side, then think of Crown Heights, Bed-Stuy, and Lefferts as Harlem... and maybe then you'll start to understand.  When a few millionaires start crossing that line in the sand just a mile or two in any given direction, in this city there's a floodgate of other millionaires waiting to follow.

Again, don't fret if you don't understand Bed-Stuy.  Even the experts don't.  Top Brooklyn brokers who effortlessly sell $10M+ packages of rental buildings in Bed-Stuy with dozens of units, brokers who have sold over half a billion in real estate in their careers still ask us, "Are these rents real?"  Yup, that's right.  You can sell hundreds of millions of dollars in real estate and still not even know what you're selling.  The reason these brokers don't know if these rents are real is because they've never had to rent a 2BR apartment in Brooklyn themselves, or watched their own price per bedroom (one of the most important metrics in all of NYC real estate) creep up from $600 to $1,600 in some neighborhoods.  10 years ago, our friend to was too slow on the trigger and missed a $750/BR sublet on St. Marks Ave & Carlton Ave in prime Prospect Heights.  The next best they settled for was on Grand Avenue towards Crown Heights for the same price, and they hated it at the time.  Now that same apartment goes for $1,200/BR, and neighbors are getting $1,500-$1,600/BR on AirBnB... in basically Crown Heights, people!

Over 100 years ago when these neighborhoods were built for ballers, before the automobile and before the train ran underground, Stuyvesant Heights wasn't too far.  But now with cars and taxis and ubers and Citibikes and hipster fixies and express A trains, people will still tell you "Nostrand is too far" or "Utica is too far".  Funny how that works.

Pro's:  totally legit Bed-Stuy sublet, "My loss, is your gain", tall ceilings, original detail, separate baths for each tenant, flexible lease lengths available, pet friendly

Con's:  not the tidiest listing, not the pricepoint novices are expecting, kitchen and bath are dated, sublets aren't for everyone

Ideally:  another serviceable rental is another tell-tale sign of the times.  We'd probably bite if we hadn't copped the limestone already.

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