New York City Housing Market Poised for a Bust

Somehow, the NY City real estate market has barely dipped during the housing bust. As Fortune reports, prices are down 7% in NYC versus a national drop of 16%. Even as Wall Street faces turmoil, prices have remained resilient. Housing prices in NYC are not the least affordable in the country. Will NY eventually correct during a second leg of the housing bust, or will home prices remain stubbornly high?

I think they will correct at some point. As the article points out:

"Just a week ago, the National Association of Homebuilders deemed metro New York the nation's least affordable market."

That New York housing is expensive is no secret. But New York's last place finish is remarkable nonetheless, making it the first metro area outside of California to take the least-affordable rap in the 17 years the NAHB has been publishing those figures.

Just 11% of area residents can afford the region's median home price of $481,000, the NAHB said. Nationally the figure is 55%. A decade ago, New York ranked in the middle of the pack in terms of affordability, with 66% of residents able to afford the median house."

This is far from encouraging news.

Why should you care if you don't live in New York? Because falling real estate in any market puts further stress on banks. Trillions of dollars in wealth is tied up in New York real estate and a crash in the market would only prolong the economic pain.