Recent NCO Article: Real Estate New York

Manhattan Residential Unfazed By Subprime Woes

By Paul Bubny

Although news reports throughout the summer pointed to a slump in the US housing market due to a credit crunch brought on by the subprime crisis, experts say it doesn’t appear to have made much of an impact in Manhattan.

“In the New York City marketplace, we’re not feeling it at all,” says Bob Scaglion, director of residential leasing at Rose Associates Inc. “There’s still a tremendous need for rental housing, and obviously the developers who are planning future developments are aware of the situation, but I haven’t seen any slowdown or hesitation in planning of future developments for the rental market.”

He calls the rental market right now is at an all-time high in terms of values, and demand’s extremely high. Everybody’s full. When something turns over it doesn’t take very long to fill it up.  It’s about as healthy a rental market as we’ve ever seen.

Scaglion adds that “if the crunch continues and it affects jobs and income at Wall Street, the first place that’ll ever feel it will be the sales market. The rental market will be the last place to feel it. We really don’t anticipate that happening.”

Brent Gleeson, president of NewCondosOnline, an online advertiser of new and pre-construction condo developments, agrees that it would take a round of layoffs in the financial sector to make a dent in sales. He adds that if any softening were to occur, it would be at the lower end of the price spectrum. “In the high end market, units are being snapped up as fast as they ever were,” Gleeson says.

Gleeson, whose company is involved in several markets across the US, notes the ways in which the New York City area is “much different than a lot of the other markets. Because of the subprime crisis, a lot of the loan products that were interest-only have gone up drastically, and we’re not seeing that as much here in New York. Also, that directly affects the mortgage-backed securities market, where the value of those securities, and the interest in purchasing them, has dropped. But in New York, you’re seeing much larger mortgages. Lenders are much more apt to lend to wealthier individuals.”

Accordingly, notes Gleeson, “Prices are much higher in New York, with $5 million to $10 million mortgages being taken out.  People don’t mind borrowing the money; it leaves them liquidity to invest in other things. The mortgage market loves it, because it helps them catch up from all of the fallout in the mid- to lower-price range.”