The Long Island Mortgage Meltdown
November 28, 2007
(Long Island N.Y.) This holiday season, couples on Long Island have a wrenching choice to make: celebrate Christmas or keep their home out of foreclosure.
As Long Island house prices continue to fall, mortgage rates for home owners with adjustable rates creep up to fearful highs creating premiums and mortgage payments that Long Islanders just can’t afford. And home owners aren’t the only ones feeling the squeeze.
Business owners across Long Island have long depended on the cash flow of the local consumer. Now, because of the housing slump and subprime loan crisis, there’s less money for homeowners to spend, contributing to lower profit margins for business owners and fewer employees to comfortably sustain. It’s just a loose-loose situation.
The greater New York area stands to lose more than $10 billion as a result of the recent subprime mortgage crisis, a new report says.
The region covering New York City, Northern New Jersey, and Long Island will be more severely impacted than other metropolitan areas in 2008, according to the study released yesterday by the U.S. Conference of Mayors.
Sales of existing homes fell to a record lows in October as banks tightened lending standards and prices fell at a record pace. The National Association of Realtors reported that sales by homeowners fell in October to an annual pace of 4.97 million, down from the revised September reading of 5.03 million. September had marked a record low since the trade group started tracking sales for both single-family homes and condos in 1999.
The median price of a home sold during the month fell 5.1 percent to $207,800 from $218,900 a year earlier. It marked the largest year-over-year drop in prices and the 15th month in the last 17 in which that key measure declined. Before the start of the current housing slump, it had been 11 years since prices fell compared to a year earlier.
Although foreclosures show no sign of letting up, equity markets in the US enjoyed one of their best days of the year after comments by Donald Kohn, the vice-chairman of the Federal Reserve, appeared to increase the chances of a cut in US interest rates next month.
Posted by News LI Editor · Edited by Brianna - Filed Under Money
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2 Responses to “The Long Island Mortgage Meltdown”
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I suppose that the wide world out there had caught on already. Real Estate is very sensitive to confidence. It he market is highly confident that prices will dependably increase in a give time frame, sales are fluid asnd easy to structure.
If confidence ebbs or disappears the market dynamics shift, and they shift markedly from “purchasing for investment” to “purchasing for necessity”. This lowering of expectations means many fewer upgrades and remodels done in the name of flippability. You don’t over-improve a property you don’t think you can flip. In fact, the opposite generally happens, you let properties run down because there is no market you are trying to impress. As a result many neighborhoods will enter decay spirals, as houses are neglected, lawns unmowed, trash accumulates, property values soften and buyers stay away, and bankers are far less motivated to lend. Once a decay spiral sets in, it establishes itself like an opportunistic weed and is hard to eradicate. There is less money for contractors, sales forces, advertising, hardware stores, paint and roofing manufacturers, premium lawn services, nurserymen, swimming pool companies, and so on. Then the tax base naturally contracts, lowering the public services, the quality of schools, the avalability of police, fire, garbage, and emergency medical services. Each betterment that accrued during the upswing begins to come undone on the downswing, often to people who have become accustomed to a certain lifestyle, and suddenly are forced to realize that their home isn’t the strong source of collateral for their borrowing that it once was. Brave new world and welcome to it.
- Posted by: bob blob
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