Why New York-area housing prices have been slower to recover

Optimism for the recovery of the U.S. housing market has run high lately, but there is less to rejoice about in the working-class communities of New York and New Jersey. According to the Wall Street Journal, the housing recovery is uneven in urban areas, with luxury housing going strong, while lower- and middle-end housing flounders.

The S&P/Case-Shiller home price index released yesterday, showed that prices in the 20 largest U.S. metros grew at a seasonally adjusted rate of 0.9 percent in May from April and were down 0.7 percent from May 2011. Compare that to the New York-metro area, where prices appreciation was more modest or non-existent: up 0.6 month-over-month but down 2.8 percent year-over-year.  The tough job market and a financial services industry that is still building itself back up from the collapse are major contributing factors to New York’s slow market, according to Maureen Maitland, vice president of S&P Indices.

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In New Jersey, home values increased at an even more disappointing rate. According to Zillow.com data cited by the Journal, 70 percent of the largest year-over-year metro declines and three of the top four were located in New Jersey. Moreover, foreclosures are still riding high in the Garden State, with 8.4 percent of homes with a mortgage, some 153,000 homes, in foreclosure during the first quarter – the highest rate in the nation behind Florida.

“It’s urban and rural markets where home prices are the worst,” Otteau Valuation Group President Jeffrey Otteau said. “That’s where the greatest number of subprime loans originated, where unemployment is highest.” [WSJ] – Christopher Cameron