New York City now has a housing bubble blog and the New York Times is simultaneously reporting two stories: record Wall Street bonuses and approximately 1,100,000 foreclosures expected in the next two years.
Whoa. What does this all mean? Let’s try to understand.
I have long maintained that New York City is a bit of an anomoly when it comes to national housing statistics, particularly when you take into account the amount of money that is made and spent here.
However, I’m not so naive as to think that our great city is immune to every negative housing trend.
That said, it is practically impossible for me to believe, based on recent market activity and discussions that I have had with family and friends who will be the beneficiaries of those big Wall Street bonuses, that our market is in fact a "bursting bubble." I wish that blogger luck, and I’m all for a diversity of opinions–a lot of people believe I have been excessively negative. But it’s a tough case to make at this point.
Furthermore, in selling real estate in Manhattan for 15 years, I have come to learn that the New York City buyer is very savvy indeed and I would go out on a limb and theorize that a small percentage of New York City buyers (at least, certainly, the Manhattan market that I serve) are less likely to get themselves into mortgage products that would result in foreclosure. Perhaps I am way off base, but this "problem" strikes me as one that is more predominant in other parts of the country where the average housing price is $200,000 and buyers have selected "low payment" mortgage options in an effort to "get in the housing appreciation game."
I could be setting myself up to eat a whole mess of crow in a year or two. Of course, it’s possible that everything will be worth 30% less than it was two years ago, but I really can’t imagine that. It was just 6-9 months ago where I believed that that was indeed a possible scenario, but I have once again watched as a pent up demand from buyers has continued to stabilize the housing market and I believe that the sentiment of those who are receiving those big bonuses combined with the powerful bonuses themselves are going to further stabilize the market in the next 6-9 months.
Here I sit the week before the Christmas/New Year’s break and I and my team are busy showing property to new buyers, many of which have entered the market in the past 30 days hoping to close on a home in the next 60-90 days. With mortgage rates still low, an increase in demand to offset the increase in supply, and the anticipation of a flood of money into the housing market in early 2007, it looks like the NYC housing market is not a bubble at all but will remain stable well into the new year.
I feel like I have to make a disclaimer here that I’m not trying to sell New York City as an infallable and always strong housing market because I saw it in the early 1990’s. That said, I just can’t ignore the reality of the level of business that is happening now and that which is anticipated in early 2007. I continue to be amazed at the strength of our market even as it has cooled.
The one big question I have left is: what’s with our economy? Isn’t it odd that Wall Street is having, by many measures, its best year ever at a time when a record number of Americans appear to be headed for financial disaster? Who can explain that one to me?