I’ve taken to begin these columns with a dateline because the global economic picture is unclear and can change on a dime.  There’s no magic bullet or one government tool that will repair our struggling world economy.  Are we headed for another recession as some economists forecast?  Pimco’s Mohamed El-Erian sees a financial crisis looming again as European sovereign debt spreads well beyond Greece and observes that all intervention despite being “massive” has not been enough to function as a “circuit breaker” to contain the quandary. 


If we head towards another meltdown, what will happen to residential real estate in New York?  If you ask industry insiders, we’ll land on our feet, and come out on the right side of even. 


Three years after a global financial meltdown, New York is still one of the most attractive markets for investors.  As the beneficiary of capital flight, our city has played host to foreign purchasers from around the globe, especially China, Russia, Brazil and Australia.  2010 turned out to be a banner year for the condo market with Russians buying trophy double digit million dollar apartments and Chinese investing in multiple smaller million dollar units. 


Ten years after 9/11, the World Trade Center has been rebuilt and downtown Manhattan is vibrant again.  Tourists are visiting in record numbers demonstrating that our city is not only resilient, but healthy and strong.  Real neighborhoods have grown in Brooklyn and Long Island City, and our streets are cleaner and safer than ever. 


This is Jay-Z’s New York “where dreams are made of”—a city that generates excitement and energy, whose diverse citizens sit on the boards of cultural and philanthropic organizations.  It’s where venture capital is found, and entrepreneurial spirit is nurtured.  It’s where the talented and the young want to be.  In the last 10 years, census reports show the population of 20-29 year olds has increased 8%.  Talent is drawn here and wants to stay here.  By 2030, our city’s population is projected to increase an additional million. 


Even as housing reports everywhere but New York are nightmarish, we in the big apple have much to be grateful for.  While the rest of the nation was feeling pain as early as 2007, New York real estate wasn’t significantly affected until after Lehman fell.  From October 2008 until about mid 2009, we experienced the fallout first hand, learning that we were not immune.  Although we had been insulated and protected by the predominating co-op model whose financing limitations precluded that our housing would ever be underwater in sharp contrast to the rest of the nation, when we got hit in New York, we managed to work through the housing malaise and subsequent recession better than most other cities, outperforming DC, San Francisco, Boston and LA. 


Unlike the stock market, which is super sensitive to both good and bad news, residential real estate is a brick and mortar investment with utility whose prices don’t swing dramatically.  Wall Street’s volatile stock market gyrations have created some super losses, and probably even more wealth which will impact our market in 2012 and 2013.  More $10M+ properties will be selling, boosting confidence throughout the marketplace.   


While everywhere else there’s a surplus of inventory, in New York there are segments with a real shortage of product.  There was no rush among sellers to list after Labor Day, so early fall housing stock fell short of expectations.  While condo properties may be plentiful, co-op inventory for large apartments is thin particularly on the West side.  In all areas of the city and all cost ranges, supply decreases as prices increase.    


On the development side, mostly smaller scale projects are underway, with more conversions from rental to condo than ground-up new construction, because the former is far less costly per square foot.  The condo construction loan is the least favorable today among lenders, with lack of credit as the reason for 600 currently stalled projects.


On the other hand, residential mortgages are returning to normalcy.  Jumbo lenders are back, and interest rates will probably remain at their same low levels through the next election.  However, it’s still taking reams of documentation to qualify and about 45 days to get a commitment.  Effective this month, confirming limits are lowered to $625,500.


The Fed’s newest flavor stimulus of the month "Operation Twist,” aimed at lowering long term interest rates, is designed to ease a restrictive lending environment.  Reaction to this latest attempt to revive the U.S. economy has been mixed.  Will it boost consumer spending?  Will it stimulate loans so companies can build new factories and hire more workers?  


Although employment numbers continue to disappoint and hover at 9%, and  layoffs at financial institutions persist, jobs are being added—albeit slowly—in private sector start-ups and in industries such as health care and especially higher education—serving to balance Wall Street’s former dominance.  Expansion plans are notable at CUNY, NYU, Fordham and Columbia.  In 2013, a much anticipated extension of Palo Alto’s Stanford University campus will bring new opportunities and fresh status to Roosevelt Island with a hi-tech graduate center for applied sciences.  In a report on 9/26/11, Stanford’s President John Hennessy explained that he chose New York because of the megacity’s ability to attract students and faculty from around the world and because of the initiative of its visionary Mayor Bloomberg.


In New York, the residential real estate glass is half full.  Come sing with Jay-Z—“Welcome to the melting pot…  / No place in the world that can compare… / These streets will make you feel brand new / Big lights will inspire you, / Let’s hear it for New York, New York, New York.”