From the NY Observer:
Foreclosure Doomsday? Not in Manhattan
By Tom Acitelli
If you’ve been reading the real-estate pages in the newspapers lately, you could be forgiven for drawing the conclusion that a national wave of foreclosures looms as the bills come due on subprime mortgages inked during the housing boom (which, the same papers relate, ended last year).
But things aren’t that grim, especially in Manhattan, where a subprime borrower’s about as common as sobriety on St. Patrick’s Day.
…
Based on data from different sources, any foreclosure wave should pass Manhattan by, though, and shouldn’t swamp homebuyers nationally. Foreclosure filings dropped in February for the second straight month, according to Foreclosures.com, a California-based firm that tracks foreclosure listings nationwide. February’s national amount dropped 3.4 percent from January to 106,074.Only 22 of those were in Manhattan; that was the same number as in January. That’s 44 foreclosures in two months in a borough where about 9,000 home sales close annually.
…
In Manhattan, though, the number of subprime mortgage originations remains negligible. The prohibitively expensive housing here means less potential buyers and tighter reins on those who do make the sales cut. If you’re going to get a hefty loan for a $500,000 studio, you’re going to have to have good credit—or be backed up by someone with such (paging Mom and Dad).But even if a buyer has good enough credit to get a loan for the typical 10 percent Manhattan down payment as well as a mortgage, co-op boards, which serve as gatekeepers for much of the borough’s for-sale housing, might still reject a buyer with shaky credit.
In short, in Manhattan, subprime mortgages aren’t common because they can’t be common. The system’s evolved to one favoring those with good credit or a lot of liquid money.
New York might be “different” but its not immune to the laws of supply and demand. Foreclosures might not be common in Manhattan, yet. I’d be curious to see just how much subprime or Alt-A (interest only) account for the mortgages in Manhattan.
The thesis “it won’t happen here because it isn’t happening here” isn’t very convincing.
That said, while there may be fewer subprime loans in Manhattan, I’m willing to bet there are PLENTY of stated income loans.
Brooklyner/lisoosh–
While no one would like to see the cost of apartments in Manhattan drop more than I would (so I can afford to go back), your contrary views of this post are wrong. Co-ops still account for the majority of Manhattan sales, and it would be pretty hard to get past even the most lackadaisical co-op Board with a stated income mortgage or a sub-prime.
The only financial shock that Manhattan buyers face in the future will come in the form of sharply increased property taxes when the ‘new construction’ tax abatements end, and that’s mostly applicable to condos.
Study the Meltdown!
http://www.paperdinero.com/BNN.aspx?id=105
CNBC’s Steve Liesman goes over the details of a new study by First American Corp. that suggests that the mortgage meltdown will last for another 6-7 years resulting in 1.1 million foreclosures. Liesman shows a chart that predicts that there will be 70,000 foreclosures for every 1% decline in home prices.
Originally aired on: 3/19/2007 on CNBC
Running Time: 4 minutes 15 seconds