Latest posts by Gea Elika (see all)
- Due Diligence for NYC Real Estate Purchases - March 20, 2018
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- Favorite Foodie Finds in NYC - March 15, 2018
With the national economy either already in a recession or fast heading in that direction, many are wondering what 2008 will hold for the real estate market here in New York City. For most of 2007, the city’s real estate market seemed impervious to developments in the national economy and the real estate market.
As 2008 ushers in about a quarter of a million subprime-related foreclosures each fiscal quarter, however, it is questionable if the city’s market will be able to withstand a full blown recession that is centered around housing market woes.
Fortunately, New York City’s housing coops have sheltered the city’s real estate market from the brunt of the subprime storm.
Furthermore, unlike in the late eighties and early nineties, when the city’s real estate inventory rate was higher than most cities’ and the recession here was consequently deeper and longer than in most cities, the real estate market here has one of the lowest inventory rates in the country. By and large, New York’s economy is considerably stronger than most of the rest of the country. So, New Yorkers’ memories of the vicious recession years a decade and a half ago will definitely not be seen again.
Another important difference from the last recession: The dollar is considerably weaker than it was in the early nineties. This is particularly important for economies that derive considerable amount of their value from the tourist industry, like New York City. Similarly, many foreigners have been purchasing homes here in the city because of the incredible deals that the low dollar offers. Simply put, the lower the dollar, the higher the foreign demand for New York City.
So, the above factors will significantly mitigate many of the effects of a nation-wide recession on the city’s real estate market. However, with Citibank announcing significant layoffs just this week, many of the experts that have predicted severe turmoil in the financial industry are watching their predictions play out.
While predictions for a poor bonus season in the financial industry didn’t play out this year, it seems certain that next year will see some cutbacks in bonus levels, though perhaps not of the 40-50% range that some analysts predict.
Mortgage requirements will also likely become stricter in the coming months. This will take some of the demand out of national and NYC housing markets.
So, 2008 will likely not be a year of significant growth in the value of the city’s housing market. However, it will not be nearly as bad as the previous major recession that ended roughly a decade and a half ago. Market conditions will fluctuate from neighborhood to neighborhood, and from building to building. It will be possible to obtain high profitability from many real estate investments in the city, but it will take more savvy investment than it has in the past several years.