It’s a funny thing about New York City: It is such a big market that stories that would normally be found in the “local” news section gets somehow transported to the desk of national news writers.
It’s nice that the city gets so much more attention. When national reporters write about New York stories, though, they often write with a broad brush, national perspective. That can lead to particularly bad coverage of local markets, the New York apartment market being first among them.
Such was the case with the Reuters article from last week that caused such a stir in the New York City real estate market. While local real estate reporters have long been aware of the time-lag between the NYC and national markets, Reuters printed an article that, with alarm bells ringing, states that the NYC market is experiencing a totally different part of the business cycle than most other major urban markets.
Yep. Pretty much any local writer or real estate agent could have told you that the New York apartment market entered the decline later than the real estate markets that helped lead us into this recession; and so, we’re not yet in recovery mode.
Like most markets, the New York real estate market isn’t chronologically in sync with the national market. That has been clear for years. When Reuters publishes a major article on the market, though, it apparently sees fit to ignore the quality reporting that many local writers have been humbly working on throughout the recession.
The bottom line: Yes, right now the New York market is weaker than most national markets, precisely because it has been so strong for so long. That current weakness doesn’t reflect an underlying shift in the fundamentals of the market. Rather, it simply means that developments in the New York real estate market lag the national market by at least two quarters.
That time lag comes in part from the city’s avoidance of the direct effects of the subprime crisis. The city’s co-ops’ higher standards for owners’ financing acted as an effective “second layer” of regulation, minimizing the number of New Yorkers with subprime loans. So, instead of the market being pulled down by the subprime mortgages themselves, it wasn’t until the securitized debt version of these subprime loans dragged down the rest of the financial sector that New York really started to feel the pinch.
That delay is ultimately a good thing. It means, though, that we got knocked down later, so we’ll get up a bit later, too.