The New Coney Island - Brooklyn's Times Square by the Sea

Saturday, November 23, 2013

NY Times - Hedge Funds buying homes in Brooklyn

Excerpt -

The median price of a home in Brooklyn climbed nearly 12 percent in just the past year to hit a 10-year record, according to a recent report released by the real estate brokerage firm Douglas Elliman. Prices for highly desirable one-family brownstones in Brooklyn have leapt almost 40 percent in the last year to a median price of $1.6 million. 

Some real estate agents say investors, more often than not, have been at the forefront of buying activity. 

“I’d say by the spring, maybe 70 percent of the sales we were seeing were to hedge funds, investors and others taking advantage of what was happening in Brooklyn,” said Stephanie O’Brien, a real estate broker with Douglas Elliman in Brooklyn. “Only about 30 percent were actual end users or first-time buyers.” 

The higher prices have changed the character and makeup of neighborhoods, often pushing more lower- and middle-income families farther east in the borough. “What’s happening is good, because it increases real estate values, but on the other hand people who have been living in these neighborhoods and hoping to one day buy or rent a larger apartment are getting priced out,” said Ron Schweiger, the Brooklyn borough historian. 

Mr. Dixon brushes aside assertions that his group’s investments have thwarted individual home buyers. 

He said many of the brownstones and other homes his group had purchased were vacant or single-room occupancy housing, requiring extensive repairs or remodeling as well as successful navigation of the city’s labyrinth of agencies to obtain the necessary certificates and permits. He said his competition for homes tended to be small developers and construction firms interested in fixing up the homes and reselling them quickly for a profit. 

And Brooklyn real estate agents say Mr. Dixon’s group has been beaten out for properties by homeowners coming to the table with cash. 

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