A Neighborhood-by-Neighborhood Vulnerability Analysis -- New York Magazine

Neighborhood Watch

HIPSTER BROOKLYN: WILLIAMSBURG AND GREENPOINT
The fact is, asking prices are down already in Williamsburg. Local broker David Maundrell says the area is off as much as 10 percent, though he’s quick to add that it looks like it’s stabilized. The culprit appears to be the huge amount of new construction (and reconstruction). According to the Furman Center for Real Estate and Urban Policy at New York University, the Department of Buildings issued 559 new certificates of occupancy here in 2005—more than five times as many as in Park Slope and Carroll Gardens combined. That said, some ’Burghers have a lot more to worry about than others. “Everything good that Williamsburg is known for, it’s on the north side,” says Maundrell. South of North 1st Street, things get far dicier, especially in smaller condo projects (eight units and below) with “rental-quality” finishes. They don’t offer much in the way of amenities, turning off high-end buyers. They also attract plenty of first-timers—creative types, often freelance workers, who have availed themselves of “exotic” mortgages that didn’t require much documentation. (At least 30 percent of Maundrell’s local clients fill the bill, he admits.) Those “no-doc loans” are harder to come by now, so if these folks can’t spring for those apartments anymore, who will? Greenpoint may see a related decline in property values, because its market catches the Williamsburg overflow. If those T-shirt designers and bloggers can suddenly afford their first choices, closer to the all-holy Bedford Avenue stop on the L, they’ll abandon Greenpoint in a Brooklyn minute.

EMERGENT BROOKLYN: BEDFORD-STUYVESANT AND BUSHWICK
Few neighborhoods in New York have been directly rocked by the subprime-loan crisis, but dozens of homes are on the auction block in these two areas, with more to come. At press time, there were 225 properties in distress here (compared with zero in Park Slope), and according to NYU’s Furman Center, a whopping 42.1 percent of home-purchase loans—and 47 percent of refinances—in Bed-Stuy in 2005 were in the subprime category. That’s because the neighborhood has been a last resort for people priced out of not only Manhattan but also Cobble Hill and Williamsburg and everywhere else within a modest commute to midtown. They have, in short, stretched themselves to their absolute limits, many with big adjustable-rate mortgages. If they can’t refinance at low rates, they’ll be in real trouble, and that would put many properties up for grabs, glutting the market. Though that hasn’t happened yet, according to Brooklyn appraiser Scott Gallant, asking prices seem to have taken a hit already; of 170 active listings in the area, 10 percent have had price reductions of at least 5 percent, according to Streeteasy .com. (Lots of these properties have been sitting on the market for a few months, too.) Bushwick may be similarly vulnerable, but broker David Maundrell says its increasing popularity among teachers, firefighters, and other middle-class buyers who hold recessionproof jobs could leave it in a slightly sturdier position. (Upside: The bargain buys everyone talks about in these neighborhoods may soon be even bigger bargains.)

EMERGENT QUEENS: LONG ISLAND CITY, ASTORIA, AND JACKSON HEIGHTS
You’ll eat well in these settled, comfy outer-borough enclaves (especially Jackson Heights), and they all have established, loyal followings. They’re distinctive, diverse, and, compared with most of Manhattan, refreshingly modest and sane. But they’re not without problems. In Astoria, a study by the Furman Center found that subprime lending doubled from 2002 to 2005. Foreclosures and lis pendens—the notifications that banks file when owners start missing payments—are casting their shadows in Jackson Heights, where two-to-four-family units have attracted starter landlords “buying for no money down, or not much, and having a much higher mortgage payment,” explains mortgage broker Jeff Guarino. “Assuming you can get tenants, [you’re fine]. But if you can’t …” And there are 21 new developments in Long Island City, per Streeteasy.com, which is a few too many for a neighborhood that still hasn’t quite shaken off its industrial roots. “They’re creating a market there, and emerging markets, by definition, are more volatile,” says real-estate expert Jonathan Miller. “Some of those markets are asking a lot compared to the rest of the housing stock. They’re leveraging the proximity to Manhattan.” If you are wedded to the idea of buying here, follow the traditional advice and stick to properties near the subway lines, suggests Andy Gerringer, the managing director of Prudential Douglas Elliman’s Development Marketing Group. “The farther away from the train, the harder it is to sell.”