"After a recession that was milder than in many parts of the country, we are seeing signs of a modest recovery in New York, but little growth elsewhere in the region and unemployment remains painfully high," said William C. Dudley, president and chief executive officer of the Federal Reserve Bank of New York.
Regional home sales, which are trending upward or showing signs of stabilization, appear better than the nation, though risks remain. Prices, however, show little sign of recovering, especially in downstate New York and northern New Jersey.
The New York Fed also reported that the regional housing sector had a less consequential effect on regional economic conditions than in other parts of the nation where housing played a more significant role in dampening economic activity.
Select reasons why the housing sector helped the New York-New Jersey region fare better than the nation during the recent downturn include:
- The region’s housing sector is relatively mature. Housing construction and related jobs generally account for a smaller share of economic activity here than they do in regions with faster population growth;
- Upstate New York added relatively few jobs in housing-related sectors (e.g. construction and sales of consumer durable goods) during the boom years;
- Overall, the region had less penetration of nonprime loans into its housing market and therefore has lower mortgage delinquencies;
- Fewer mortgages are "underwater"—whereby more is owed than the home is worth—lessening foreclosure risk and consequent accompanying distress and reduced consumption.
"During this recession, the housing sector contributed less volatility to the regional economy than it did in much of the nation," Mr. Dudley added.
Other highlights from within the region:
Upstate New York: The housing boom and bust largely bypassed upstate New York where construction activity is a relatively small part of the overall economy. Home prices have generally stabilized across upstate New York, with some parts (Buffalo, Rochester and Syracuse) even experiencing price increases over the past year.
Downstate New York, Northern New Jersey and Fairfield County, CT: Relative to upstate New York, housing markets in most areas in downstate New York and Northern New Jersey more closely tracked the national cycle with sales activity and housing prices ramping up during the housing boom, but then dropping sharply. Home prices have continued to decline in this part of the region, influenced by distressed sales and lower demand from the recession and tighter credit standards. New Jersey and parts of Long Island had more nonprime mortgage activity than the national average and now has more delinquencies and foreclosures than in much of the region.
New York City: The economic recovery continues at a moderate pace in New York City. Home prices across most of New York City rose particularly rapidly and did not peak until 2008. After declining sharply in 2009, home prices appear to have stabilized. Still, risks to the housing outlook remain. There is still a considerable supply of units in the pipeline, securities industry employment has yet to stabilize, and rents are still attractive relative to home prices.