Subprime Crisis Does Not Bode Well For Rockaway
Comptroller William Thompson says that we have a problem, and he is undoubtedly right. While no precise local statistics on foreclosures are available, calls to the Comptroller's Foreclosure Help Line and citywide numbers show that people are losing their homes at record rates. Foreclosures around the city have skyrocketed 30 percent in the last month. In August of 2006, there were 572 foreclosure filings. Last month, there were 1,121. Statistics provided by the Comptroller in a new report show that in Queens alone there are 9,458 homes in pre-foreclosure mode, 1,307 going into auction and 2,084 that are now owned by the banks that provided the mortgage. Experts, including Comptroller Thompson, who spoke with The Wave about the problem last week, say that there are many reasons. The major one, of course, is that many lending institutions provided low-cost, adjustable-rate mortgages to borrowers who could not qualify for traditional, fixed-rate mortgages. As the cost of the mortgage payments grew, the borrowers' ability to pay did not. Also, many people who bought homes when prices were steadily increasing each year hoped that they could "flip," or resell them, at a profit within a few years. Such buyers are now finding that they cannot get rid of their houses, even for the prices they paid several years ago. That is true of both single-family and two-family homes. Why is Rockaway particularly susceptible to this latest housing crisis? Because Rockaway faces the one-two punch of the sub-prime mortgage problem and a tenuous rental market. Virtually all of the new homes being built in Rockaway are two-family units. In many cases, borrowers were approved for mortgages based, in part, on the income that they were expected to receive for renting one or more rental units. Now, however, many of these new homeowners cannot find a tenant willing to pay the $1,200 or more in rent that they need each month to remain solvent on the loan. With the enormous home-building spree of the last few years, there are simply too many rental apartments chasing too few tenants. What can be done to keep the housing and commercial revitalization ball moving forward in Rockaway? The answer may sound simplistic, but it is to keep the houses affordable to middle class buyers and to insure that only those qualified are provided with mortgages. This week's Federal Reserve reduction in the prime rate may ease the impact of the mortgage crisis on adjustable loans, but will do little to help the two-family homeowner with an empty rental. That is why we must change the development plan. A healthy mix of single-family, twofamily, and multiple-family development, with emphasis on the single family, is the key to a stable home market. It may already be too late, but continuing to build two-family homes in the face of a static rental demand is a formula for neighborhood failure. Rockaway is on a roll and we hope that it is not derailed by greed and poor financial decisions on the part of any of the stakeholders, be they lenders, developers, or buyers.