As we anticipated, the prime market is beginning to show material signs of stress. Although sub-prime delinquency rates still hover in the mid-20% range, their growth was only 1.8% as compared to 5.8% in the second quarter. (Keep in mind that prime loans represent almost 80% of bank exposures.)
How does this relate to Manhattan? For one, this little island has the second lowest home ownership rate of all of the boroughs (23%) after the Bronx. Second, fewer than 1% of purchases made over the last few years were through sub-prime loans, versus up to 50% in the outer boroughs.
As wealthier Manhattanites struggle with job losses and declining net worths, many (read “buyers”) await the second leg of the city’s housing downturn. Sellers clearly think the worst is behind us, ergo the continuing gap between buyer and seller expectations.