Wednesday, May 28, 2008

Why Are NYC Housing Prices Holding Up?

There has been some weakness in the New York City housing market, but Manhattan's housing prices have remained surprisingly strong. The conventional wisdom is:
- The decline in the value of the dollar makes U.S. properties look very cheap to foreigners.
- Foreigners are looking for quality and Manhattan is the apex of quality.
- Aggressive lending policies were much more prevalent in Florida and California (along with Nevada and Arizona) than in the Northeastern United States.
- NYC coops maintained their credit standards even when mortgage lenders did not.

Here's another possible explanation: New York City is the densest city in the United States, with the best transit system, and a transit system is becoming more valuable. Higher gas prices are making the automobile commute look wasteful. After World War II, the rest of the United States plunged into the creation of highways, purchase of cars and the auto-dependent suburbanization of big cities. NYC already had its subways and commuter trains in place. With the rise of the price of gasoline, the suburban model is being reexamined. For middle-class people under pressure of higher prices, NYC is becoming steadily more attractive.