The housing market in the US has been on an obvious downfall recently; however, New York City is not having this problem. The question is: how long can NY stay afloat? This determines how long the economy will be in a recession. New York has been named the least affordable city in the US.
Housing prices nationwide have decreased 16% in the past year but NYC has only dropped 7%. This continues to boost home prices nationwide. House prices in the New York City area have been staying very high- suggesting that much steeper declines could be in the future. How much these prices drop will play a large role in the US financial sector.
If prices were to decrease sharply it would cause a large expense in foreclosure.
3 comments:
I think what is going on with New York hosing prices is interesting at this time. It seems ironic to me that the city with the least-affordable housing at the time has seen the least amount of drop in housing prices. The way our economy is right now, one would think the most expensive homes would be the ones to lose the most value. I agree with the article that it seems New York’s housing prices should be lowering in the near future following the countries trend.
Considering the rough patch Wallstreet has hit it does seem interesting the city in which so many investors and brokers call home has not suffered as great of a blown from the burst housing bubble. The worst is probably yet to come for NYC's real estate market.
It's not surprising to me that NYC has managed to keep relatively afloat while most of the nation suffers from the housing market decline, for a number of reasons. The city still attracts a lot of people who want to buy homes there (after all, it’s NYC). Greater demand drives up prices. Foreign demand is and always will remain high, but especially now due to the weak dollar. Also, a limited and controlled inventory (at least in Manhattan) ensures prices stay up or don’t go down as fast. Up until recently, major developments and restorations in Harlem and the Bronx had also driven up prices. People purchased and invested in these areas, anticipating future increases. Also, the resilience of Manhattan seems to offset the greater number of foreclosures in boroughs like Queens and Staten Island, who have felt the crunch more. If you studied just the suburbs, you might find numbers that are more on par with the rest of the nation.
I agree with Mark that it’s ironic that the least-affordable city to live in has the least drop in housing prices, but have to disagree that expensive homes/apartments would experience the biggest fall in value. Maybe the most expensive homes will lose the most value absolutely (like, going for 6 million instead of 7, if the luxury market suffers at all during the recession), but I also believe that these homes (and their owners) are better off than those in the subprime market. The rich will keep on buying. Compare anything facing Central Park to a house in Queens (nothing against Queens). There will always be a buyer for a luxury apartment in NYC, but the suburbs are flooded with foreclosed homes that those who want them can’t afford, and those who can afford don’t wait them. Everything else is still too expensive – people are expecting prices to fall further, and thus they’re not buying.
It seems like prices have to fall a bit further in order for recovery to happen, even in Manhattan, and I agree with Mark and the article that they will. I don’t think they’ll fall drastically, though – it will be a gradual process.
I think the worst is yet to come for New York, but it won’t be that bad. (Then again I’m an optimist). The recession will affect everyone, and that includes people on Wall Street who would normally flood the city with home purchases. As Phil said, Wall Street’s starting to feel the crunch. With less cash and less bonuses, and less certainty about their jobs, those in the financial sector will not be as confident to buy homes. People won’t be spending money in general. Also, those who really can’t afford to live in the city will leave it, end of story. A fall in demand will cause prices to fall further, and people who’ve waited out for rock bottom might sense they’ve hit it, so they will start to buy. Then again, this depends on how long the recession lasts.
The question is whether homeowners can whether out the recession and the decreasing value of their home without being forced to sell for far below what it’s worth. Maybe the city should focus on developing in the suburbs and subprime areas, rather than on the already resilient city.
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