Unruffled by the moribund United States housing sector, New York’s residential property market is booming.
With mortgage rates and property prices at historic lows, the city’s affluent residents are cashing on the economic conjuncture to get a pad at bargain values.
Real estate agencies are reporting a surge in activity in private home sales in the Big Apple in recent months.
“Right now we are actually experiencing a pretty strong market … A lot of activity, a lot of signing of contracts,” said Ms Pamela Liebman, CEO of The Corcoran Group, New York’s largest residential real estate agency.
“This has been one of my best years,” says Ms Ariel Cohen, executive vice-president at Prudential Douglas Elliman, another agency.
The housing sector was at the heart of the financial crisis that plunged the US economy into recession in December 2007. Across the country, the sector has been struggling to recover from the price collapse.
New York City also felt the impact of the recession with an average drop of some 20 per cent in apartment prices from their pre-crisis peak and an extremely low sales volume in 2008 and most of last year.
But while property prices have remained mostly flat, sales in New York have surged unlike anywhere else in the country.
A report by the Real Estate Board of New York (REBNY) showed a 72-per-cent jump in the total value of house sales to US$7.6 billion ($10.3 billion) in the second quarter of this year compared to the same period last year. Apartment sales volume in Manhattan increased by 82 per cent over the same period, it said.
The accelerated activity in New York, where the average price per square foot stands at US$1,061 ($11,420 per square metre), was due mostly to the high earnings in the city’s financial sector in past months, statistics show.
Another key factor stimulating the market has been the extremely low mortgage rates. Interest rates on a 30-year “jumbo loan” can be as low as 4.375 per cent and 3.75 per cent for 15-year loans, according to mortgage broker Mark Lazar, vice-president of Allied Financial.
The mortgage market was thrown into turmoil after the 2008 bailout of troubled mortgage giants Fannie Mae and Freddie Mac, which provide financing worth more than US$5.9 trillion to the US housing sector, accounting for almost three quarters of the mortgage market. Banks remain extremely cautious and prudent in approving mortgages.
Mr Lazar turns down almost one third of people contacting him seeking a mortgage because they do not meet the basic criteria set by banks.
“I tell them you are not mortgageable,” he said. “Banks are reluctant to lend. They feel it is better to limit the lendings for now until the road is cleared” by new legislation.
Source : Today – 20 Aug 2010