The foreclosure crisis has reached the trendiest and wealthiest neighborhoods in New York City. In Manhattan, one out five home sellers has experienced a loss on home sales.
Early in the housing market collapse in 2007, industry experts predicted that Manhattan would be spared from the drastic decline of home prices and the increase in the number of bank foreclosed homes. They called the area island of wealth because it was never touched by declining property values and increasing foreclosure properties which were happening in low-income neighborhoods of Queens and Brooklyn.
Fast forward to 2009, already the real estate market in the Upper East Side and Chelsea is sagging from too much strain brought about by low property prices and high volume of foreclosed houses. Most notable activity is the sale of properties for less than the fair market value.
Market data showed that 18.7 percent of properties sold in Chelsea in May fetched less than their original prices. Chelsea is one of the five most affluent neighborhoods in Manhattan.
At the Upper East Side, 15.3 percent of properties were sold at a loss, 14.2 percent in Gramercy and 9.3 percent in the Upper West Side. Except for the Upper West Side, the rest of Manhattan’s wealthiest neighborhoods experienced the worst property price drop compared with the 12.5 average decline for the entire New York City.
According to industry experts, the property price drop started as a ripple in 2008 and has now become a growing wave. They said that homeowners in affluent areas can fend off the effects of the housing recession longer than those in the less-affluent places. However, homeowners in affluent areas can only stave off recession for a certain period of time.
Meanwhile, sales and resales of foreclosure homes in Manhattan are increasing in the areas. As of May, foreclosed single family homes accounted for 11 percent of the total home sales, representing an 8.8 percent rise from the same month last year.
In Queens, the low-income neighborhood of Jamaica posted a 23 percent increase in foreclosure home resales.
Industry experts are anticipating more housing troubles as New York is starting to experience the slump other metropolitan areas experienced since 2007. They expect foreclosure rates to increase by next year as drastic decline in property prices typically fuels foreclosures.
