A hastily drafted moratorium on foreclosures has kept many New Yorkers in their homes. It’s about to change.
New York City has been the big holdout in the U.S. housing meltdown. Wealthy foreigners flush with weak dollars and a finite supply of pricey Manhattan condominiums have kept the market moving.
But the New York hiatus from a harsh real estate market is likely coming to an end – and it’s not just the estimated loss of 48,000 jobs in the city over the next year that will cool home prices. Foreclosures are expected to start heading higher—possibly sharply higher—as soon as next month.
The foreclosure rate is important because a rise is traditionally followed by a drop in home values. As a rule, every one foreclosure in a neighborhood lowers home values in that area by about 1%.
The foreclosure rate in New York has been artificially depressed, thanks to a state law passed in August. The trouble is, that relief has been temporary. As the moratorium lifts, the fear is that foreclosures will spike and the housing market will face even tougher headwinds. As more states consider delaying foreclosures to keep people in their homes, what happens next in New York could well be instructional.
“It is going to be an absolute disaster next month,” said Bill Staniford, the CEO of PropertyShark.com, a real estate research site. “We haven’t seen anything yet.”
