Property Grunt

Wednesday, August 22, 2007

Closing the barn door

That is what you do before the horse runs away.

It appears that cracks are now showing in the armor of the New York real estate market.

The research firm Realty Trac released a report Tuesday saying foreclosures across New York State jumped 23 percent from last July.

The biggest spike in the city was in Queens, where the number of foreclosures was up a whopping 126 percent.

The Bronx saw a 54 percent increase, Brooklyn saw a 51 percent increase, and Manhattan a 12 percent increase. Only Staten Island bucked the trend; it saw a 6 percent decrease.

"Anyone who thinks New York City is going to escape the sub-prime crisis is just plain wrong,” said Senator Charles Schumer in a statement. “The foreclosure storm that has been brewing elsewhere in the country has now made its way to New York."

Apparently Chuck is so freaked out about the subprime crisis affecting New York that he is pulling the legislative big guns.

"The subprime market is the wild west of mortgage loans and its time we bring a sheriff into town," Schumer said. "The first step is making sure that borrowers are protected from these usurious lenders. It's long past time that we ensure that working people are protected from loans that promise them the world and instead give them a mountain of debt and leave them homeless."

The impending avalanche of mortgage foreclosures in upstate New York and across the nation can be directly tied to the exploding popularity of costly non-traditional mortgage products over the past decade. These non-traditional mortgage products, which include hybrid adjustable-rate mortgages with intricate interest rate terms and conditions, have been sold to middle and lower-income families in record numbers. While they offer attractive and easy lending terms, they also include excessively high interest rates that can sharply spike, leaving new homeowners struggling to meet rising mortgage payments.

I understand he is trying to do his job, unfortunately he is a day late and a dollar short. If he wanted to prevent this than he should have gotten the party started at least a year ago.

It appears my past entries on the subprime crisis foreshadowed of our new reality. If you want a refresher. Here they are.

What about Manhattan?
What about Manhattan part 2?
What about Manhattan part 3?

If you think I am getting any type of satisfaction from this, I'm not. In fact I am quite concerned about these developments.

Those of you who know me personally, which is probably none of you who read this blog, know that I am from "upstate" New York. The area I am from is a known for its high property values, taxes and a school system that could be mistaken as the setting for A Separate Peace. The only barrier of entry in this town is money and there is plenty of it to go around.

But unlike Manhattan, the market there is as flaccid as Rosie O'Donnell's libido. It has become the Costco of residential real estate where you can practically buy houses in bulk. And these aren't bulls**t homes, these are the multi-million dollar class homes where you entertain an Ambassador or President. In fact one of the candidates for President was considering moving there but chose another town that was nearby but just as prestigious.

If you open up my hometown's newspaper it is chocked filled with real estate ads. In fact they went as far as setting a up a real estate section that is similar to the New York Times Real Estate section. But houses are barely selling. And it is not just in my town but the surrounding areas also.

The irony though is that I do not think the local brokerages really care. They have all been bought out by the conglomerates who only desire to extend their influence in these areas. As far as they are concerned, they already made their money.