Keith Jurow at the Real Estate Channel recently posted an interesting piece, teasingly titled "A Housing Price Collapse in Queens New York Is Almost Certain," in which he argues that homeowners in Queens are a sorry mess who haven't gotten their comeuppance yet.
Citing figures from RealtyTrac and Trulia, among others, he calculates that as of June 16 there were 9,054 Queens homes that banks had put in default since February 2009, none of which had been foreclosed yet. More than 4,000 of those have mortgage debts above $400,000. By his count, at least 25,000 properties in Queens are delinquent in their payment by 60 days or more.
"What happens when the banks start putting into default the 25,000 seriously delinquent homeowners and foreclosing on the 9,000+ properties currently in default?" he asks.
"This overhang waits like a potential tsunami that we know will follow when an earthquake measuring 9.1 erupts underwater as it did in late 2004. Sooner or later, the banks will have to begin whittling down the growing number of delinquent and defaulted properties in Queens. What will happen to prices when the banks finally start to place this potentially enormous REO inventory on the market? Simple. Prices will plunge. Make no mistake, it will be ugly."
In other words, Jurow is worried that Queens' overly positive foreclosure data is hiding something nasty. According to RealtyTrac, one out of every 400 households in the U.S. was in some stage of foreclosure in May, but only one out of every 2,285 Queens homes was. Foreclosure filings in Queens fell 32 percent from the previous month and 48 percent from 2009, whereas the U.S. average only fell 3 percent on the month and barely budged from the year before.
Is it really as bad in Queens as Jurow makes it out to be? No, says Jonathan Miller, CEO of New York appraisal firm Miller Samuel.
"There's already been a big correction: Queens started to see prices decline about a year and a half before Manhattan did," says Miller, whose data shows that prices in Queens fell 18 percent between the third quarter of 2008 and the first quarter of 2010. "We have seen a very sharp correction to date. The way I look at it, the worst is behind us."
Granted, the foreclosure process takes about two years in New York state, so it could be that we won't know the truth about Queens' foreclosures for a long time. RIck Sharga, senior vice president at RealtyTrac, points out that by then the housing recovery may already be robust enough that a foreclosure wave won't do much damage. While Sharga doesn't expect a full housing recovery until 2013, many experts believe the housing market will at least be on the upswing by the middle of 2011.
It's also worth noting that New York City real estate is very fragmented. While it's possible that current delinquencies in Queens might translate into a wave of foreclosures later on, if those bad loans are concentrated in certain neighborhoods, they may not affect the rest of the borough.
If you're wondering whether the Queens pattern might be repeating itself in other parts of the country: It already is. The suburbs of Los Angeles and Miami, for example, are among the hardest-hit.
Tara-Nicholle Nelson, a real estate agent and spokeswoman at Trulia, points out that in many suburbs, luxurious subdivisions went up around the same time, with buyers getting into the same ridiculous adjustable rate mortgages. As a result, many of these areas defaulted en masse. Many new buyers, meanwhile, are not interested in picking up these defaulted mansions and instead buy a smaller home, as long as it's closer to the city center.
That's one of the reasons homebuyers tend to crowd into large urban centers in the first place: There's safety in numbers.
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