Will NYC dodge the real estate crash ?

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So far, New York hasn’t taken the kind of housing price hits we’ve seen in Los Angeles. The latest Case-Shiller home price index shows Big Apple area prices down 7.3% in October from a year ago. New York prices are also down just 11.4% from their 2006 peak.

Here in L.A., we’re down 27.6% in October from a year ago and off 32.6% from their 2006 peak, according to Case-Shiller.

New Yorkers justifying the apparent side-stepping of a full-on real estate crash cite variations on many of the same themes once offered by those who arguing Los Angeles was not in a bubble: undeveloped land is scarce, everyone in the world wants to live there, it’s filled with rich people and immigrants who pool their money to buy homes, etc...

New York hasn’t been immune to down markets in the past, however. Home prices fell 14.5% there between 1998 and 1991.

New York may not have quite as far to fall as Los Angeles. Home prices in the Big Apple rose to a peak in 2006 126% above prices in 2000, Case-Shiller’s base year. In the same period, Los Angeles prices peaked at 174% above 2000 levels.

But there are signs New York may be overheated. This week, Irvine real estate consultant John Burns put out some interesting stats on building activity. In Los Angeles, the level of building permits is at 19% of its peak level. That shows an over-supplied market correcting itself, as builders back off from construction to let the existing supply move.

In New York, permits are still at their peak level, according to Burns’ analysis. Housing costs in New York City are also at 78% of income levels, compared to Los Angeles’s still-heavy but lower 61% level.

That means the typical person in New York would have to spend 78% of her income to live in the median-priced home.

Economist Dean Baker of the Center for Economic Policy and Research, who was an early and so far accurate predictor of the current real estate bubble, thinks the crisis on Wall Street will have a heavy local impact. Laid-off financial sector execs have the money to stay in their homes longer than most folks who’ve been pink-slipped, which may delay the impact of high-end job losses on real estate there, Baker said.

But he cautioned, ‘New York’s lost a lot of jobs, it’s hard for me to see them losing as many jobs as they have and real estate not taking a hit,’ he said.

--Peter Y. Hong, David Pierson