Unlike most cities in the country, the Manhattan real estate market was not initially touched by the subprime mortgage mess. In fact, as I report in our "A Tale of 5 Cities" series, up until recently there was little evidence of problems with subprime mortgages or foreclosures in Manhattan…and the real estate market here charged ahead much like it had in recent years.
The simple reason is that Manhattan is not a subprime mortgage market. In other words, people who can only obtain subprime loans don’t and can’t buy in NYC (at least not in Manhattan). That’s because the majority or homes sold in Manhattan are co-op apartments. And, co-op boards, which must approve all buyers, did a far better job vetting the finances of prospective co-op shareholders than banks typically did. On average, people buying Manhattan apartments put down 35 percent of the purchase price….and finance the remaining 65 percent. Simply put, if you need a subprime loan, you most likely won’t be buying a home in Manhattan.
But, as it turns out the Manhattan market is being touched by the sub-prime problem...but in a much different way than the rest of the U.S. You see, those who work on Wall Street are big buyers of NYC real estate. Now that the crisis in the credit markets (brought on my bad subprime debt) has been eating into the profits of big Wall Street firms and causing some to even crater (e.g. BS), Wall Streeters are getting cautious about their spending. And, even though there's not yet been big evidence of a curtailment in real estate purchases in Manhattan, people are getting worried. If profits continue to evaporate for Wall Street firms and hefty layoffs follow, it's improbable that the Manhattan real estate market will go unscathed.
So, that's the Manhattan little subprime problem…our own unique version.
Comments
Maybe it is just an election year, but with unemployment at 5% (used to be called full employment) and the mall’s parking lot almost full, why all the doom and gloom? Is it because the news media keeps telling us how bad things are? Sure home foreclosures are up. Big deal, this is not new. In 1987 in Oregon we looked at a number of government (FHA) owned homes. And again in 1997 in southern California with unemployment high, 10 to 20% of the “homes for sale” ads were “bank owned” or “foreclosed.” Anyone with a brain in California should have know that by 2004 & 2005 we were in a housing price bubble after we had just seen the dot com bubble pop.
You want to read a ggod one! It was 1978 my mom had to sell her house, I was 17 so could not understand economic dynamics. The markets were depressed,they said, the house could not sell till a Vietnameese agreed if we would finance. All I remember is the Montreal press writing articles of the deportation of some General Dan van Quang from Canada and some years later the house resold for five or six times more than we got. What got me is that just after we sold a Cousin who had hit the beach in Danang 1964 showed up from El Salvador to help us move. Coincidently we had a farm and at around the same time the government of Quebec introduced legislation creating a Green Zone. An agri zone specifying that land could not be sub divided. It was at the same time that Lybia introduced their green Line. Now years later knowing what I could not know back then I am convinced that Canada`s governments are self centered archaic and playing 18th century politics.Oh! and what this has to do with sub prime. Like I said we had to finance the buyers at the going rate of 5% and just a few years later the bank rates had jumped to 19% so we were getting hit for at least a 14% spread and had to negotiate which had us incur another loss. So co-incidently it was at the same time that El Salvador where my mom is originally from stepped on the international stage.So you can imagine why I don`t understand what all the fuss over sub prime is. And don't beleive the Canadian government that they had no idea where Central America was. Not only do I think they knew where El Salvador was I think they were involved in the conflict.