While the country worries over what impact the subprime mortgage crisis will have on the housing markets, New York City’s suburbs have turned in decent, if level, second-quarter numbers. In the same way a large body of water acts as a buffer against extreme temperatures, New York City’s market strength has been a buffer to cities and towns in New Jersey and Connecticut, and on Long Island and in Westchester. If anything, high residential prices in the city have encouraged buyers to look in the suburbs.
The city’s strong job market also continues to support commuters who invest in homes in the suburbs. Sales activity is stronger in New Jersey counties close to Manhattan, and Wall Street bonuses have buoyed sales of high-end properties in Fairfield County communities like Greenwich.
But with uncertainty about times ahead, it remains to be seen if being close to Gotham will continue to cushion the blow. Long Island foreclosure figures, for example, are expected to rise in a rougher market.
The following are snapshots of New York City’s suburban markets:
Expecting more mortgage defaults on Long Island
The Long Island housing market has flattened, though mortgage defaults could increase if the subprime mortgage crisis escalates. The good news: Median prices for the second quarter of the year in Nassau and Suffolk counties barely budged from the year-ago quarter. The bad news: The picture could get a lot worse. Pearl Kamer, an economist with the Long Island Association, the region’s largest business group, noted that Long Island has seen a higher rate of defaults than the national average in recent months. What’s more, she anticipates a larger amount of defaults continuing the region’s housing slowdown to 2009.
Median home prices are higher in Nassau County than in Suffolk County, reflecting Nassau’s proximity to New York City. According to the Multiple Listing Service of Long Island, the median home price for Nassau County in June was $485,000, an increase of $15,000 over the median home price in March but down from last year’s median home price of $500,000.
Meanwhile, the median home price for Suffolk County in June was $420,000, an increase of $26,000 over the median home price in the prior quarter, and an increase of $10,000 over the median home price a year ago.
Kamer said the current climate will affect future development on Long Island.
“If you have not put a shovel in the ground, you will postpone,” she said.
She noted that in the past, developers have been hesitant to build in Nassau and Suffolk counties because the land-use approval process is a long one, and multifamily development often meets with community opposition. She did, however, point to several major projects slated for the next decade, including a 450-acre-plus development on the site of the old Pilgrim Psychiatric Center in Islip in Suffolk County. That complex will house 9,000 apartments, 3 million square feet of office space and 1 million square feet of retail space.
In the worst-case scenario of a longer downturn in Long Island’s housing market, Kamer said the 2009 date for a rebound would bring about a rise of 2 to 3 percent in sales.
Westchester: still not affordable
A lack of affordable housing continues to be a cause for concern in the middle portion of the county, as entry-level buyers are having a harder time purchasing homes in Westchester, already one of the most expensive markets in the country. If the subprime mortgage crisis spreads, it will likely hit buyers with poorer credit ratings and first-time buyers.
Westchester saw home prices drop 2 percent in the second quarter compared to the same period last year, which industry leaders are characterizing as a “leveling off.”
Second-quarter figures show the median sales price as $700,000, a strong rise from the first-quarter median of $635,000, but a drop from $715,000 registered the same period last year, and a reversion to the same median price as in the second quarter of 2005.
More worrisome, sales volume for the second quarter shows a drop of 2.5 percent, to 2,342 sales, from this time last year.
“It is not the greatest year we’ve had,” said Gil Mercurio, chief executive officer of the Westchester County Board of Realtors.
Investors are also shying away from buying in Westchester. The multifamily housing market is seeing a big volume decline, with a 28 percent drop in the number of sales of two- to five-family homes from its level last year. Mercurio said the multifamily drop resulted from investors seeing real estate being a less safe investment than securities.
But Mercurio is optimistic about the Westchester market’s future. He pointed to the strong New York City economy, along with the county’s own 3.3 percent unemployment rate, as strengths. Mercurio noted that he has seen increased activity in the $1 million-plus market, with homes moving faster at that price point.
“We don’t have the features that have contributed to the problems elsewhere,” he said. “We don’t have overbuilding. We don’t have much in the way of investor presence in the market.”
Hudson County reaps Manhattan buyers
In New Jersey, the median statewide price rose slightly over last year, with housing markets closer to New York City faring better than those farther away. Development-heavy Hudson County continues to lead in real estate sales, with 12 percent growth in contract sales in the first six months of 2007 over the first half of 2006. Inventory grew by 1 percent in the first half of 2007 compared to the first six months of 2006.
“In Hudson County, condo prices average $600 a foot, while in Manhattan they average $1,100 a foot,” said Jeffrey Otteau, author of the Otteau Report, a widely read New Jersey market report. “Manhattan is throwing demand to markets like Hudson County.”
In general, towns located on rail lines with direct access to Midtown see stronger growth than others, according to Otteau. He pointed to Essex County’s Summit, Millburn and Montclair as examples of other suburban communities experiencing growth.
Otteau, also the president of the Otteau Valuation Group, said the secondary markets of the state, those with higher amounts of suburban sprawl, have begun to see decreases in the amount of contract sales. He noted that inventory throughout New Jersey has risen 9 percent compared to the first half of 2006.
Otteau said a lack of jobs is the leading cause of the decline, particularly in the suburban parts of northern New Jersey. He noted that while technology jobs were transferred from the city to New Jersey in the 1980s, the situation has since reversed itself.
Statewide, while the volume of sales has dropped, numbers released by the New Jersey Association of Realtors show a slight increase in median home prices for the first quarter of this year — the latest quarter available from NJAR — over the same time last year. At $361,300, the first-quarter median price is up from the $356,700 seen in the same period in 2006.
Looking ahead, Otteau believes higher gas prices will continue to help suburban communities with established downtowns, easy Manhattan commutes and pedestrian-friendly layouts.
Feeling fine in Fairfield County
Unlike the other suburban markets, Fairfield County appears to be shrugging at the prospect of a downturn. Barry Rosa, vice president of Prudential Connecticut Realty, said the region’s economy has helped the county stay strong in the current real estate market. Higher-priced homes in particular are experiencing strong sales, fueled by Wall Street bonuses as executives and their families look to trade up to larger homes. Whether that will be affected dramatically by Wall Street’s credit crunch and the fallout in the mortgage industry remains to be seen.
The luxury home market is robust in the Greenwich and New Canaan areas in particular. Rosa notes that many purchasers in the area have bypassed Westchester because of higher taxes and prices.
Here, buyers can expect to pay lower prices than in Westchester for the same type of luxury homes, he said.
Overall, the Fairfield County single-family housing market has remained steady for the first half of the year, while the condominium market has fallen, he said.
The median price for a single-family home in the county for the first half of 2007 was $585,000, a 4 percent jump from the same period last year. The market has also seen a slight jump, about half a percentage point, in the number of single-family homes sold in the last year, with 3,912 homes sold.
While the median condo price has fallen $900 to $299,000, the number of condo units sold in Fairfield County has dropped slightly more than 11 percent from this time last year.
Of all the towns in Fairfield County, Darien has seen the strongest growth, with the median home price jumping almost 20 percent from 2006 to $1.18 million. Redding posted the only other double-digit percentage jump in median home prices, with a 10 percent jump to $755,000 over last year. The largest drop was in Newton, with median home prices falling 11.5 percent to $517,500.