New York City Likely to Feel Foreclosure Effects in 2009

by Donald Hanz on cities

New York City had several factors in its favor that protected it from the foreclosure wave that hit hard many other cities in 2008, such as those in California and other Sunbelt States. New York City no longer has areas as large as in other cities for housing development, naturally protecting the city from overdevelopment. It also hosts more people per area than any other place in the country, preventing bloated housing inventories.

What is more, New York City’s condo owner associations and co-op boards had lots of competing buyers that they were able to ignore buyers showing weak financial positions. They also were able to reject buyers that planned to use high-risk mortgage instruments. With these, the city did not suffer the plague of foreclosure that hit other cities.

However, according to Pam Liebman, chief executive of New York City brokerage Corcoran Group, signs of a softening housing market are starting to appear in the first days of 2009. Halstead’s economist Gregory Heym also said that the average time an apartment is on the market has shot up to 100 days, a big jump from the 16-day count from the last months of 2007.

Furthermore, Heym said the collapse of some big multinationals in the financial sector is expected to pull down the housing market since the city’s economy depends chiefly on the financial industry. The collapse of Lehman Brothers and the sale of several other investment banking firms caused large layoffs that broke confidence in the housing market. The layoffs could also trigger foreclosure filings as middle-income families have not been immune to loss of homes.

Meanwhile, the city of New York has launched some more initiatives to prevent further foreclosures. The city will apply funds from the state’s Division of Housing and Community Renewal to help borrowers facing foreclosure. It will also use funds from the State of New York Mortgage Agency to expand foreclosure counseling programs.

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