By CATHERINE CURAN
The short-sale trend sweeping the rest of the country has stormed into New York City, with some areas in Queens, the Bronx and Brooklyn far outpacing the national average.
By CATHERINE CURAN
NEW YORK — The short-sale trend sweeping the rest of the country has stormed into New York City, with some areas in Queens, the Bronx and Brooklyn far outpacing the national average.
Research conducted by online foreclosure marketplace RealtyTrac for The Real Deal shows that preforeclosure sales — of which roughly 75 percent are short sales — are spiking dramatically in a few ZIP codes here. In several areas of Queens, Brooklyn, Staten Island, and the Bronx, preforeclosure sales amounted to 20 to 40 percent of all sales in the first quarter of this year, far outpacing the national average of 12 percent.
Short sales, which occur when a home is sold for less than what is owed on the mortgage, are also on the rise in New York City overall.
"There’s been a lot of discussion that short sales are coming, but the reality is they are here," said Jonathan Miller, CEO of Manhattan real estate appraisal firm Miller Samuel.
Manhattan, however, remains largely unscathed, with just 15 preforeclosure sales in the first quarter of 2010.
The neighborhoods with the highest percentages of short sales so far this year include Morrisania and Baychester in the Bronx; East New York, Bushwick and Bedford-Stuyvesant in Brooklyn; Jamaica, Far Rockaway and South Ozone Park in Queens; and Elm Park and Port Richmond in Staten Island.
While RealtyTrac records preforeclosure sales that are already under way, more are hitting the market. StreetEasy lists 77 short sales on the market in the neighborhoods that have been the busiest in Queens, Brooklyn and Staten Island.
The current total of listings for Queens is 1,368, according to calculations from Philip Tesoriero, broker/owner of Exceptional Homes Real Estate on Long Island, based on data from the Long Island Multiple Listing Service.
Perhaps not surprisingly, the hotbeds of short-sale activity correlate closely to foreclosure activity. The 10469 ZIP code in the Bronx, for example, has one of the highest percentages of short sales in the county. It also has the highest percentage of foreclosures in the county, according to RealtyTrac, which is based in California.
The ZIP code’s raw number of short sales for the first quarter is small, about 10, but the growth rate and comparisons with last year reveal a troubling acceleration. Short sales in 10469 — which covers Baychester — in the first quarter were about half the total for all of last year.
Broker Jacqueline Edwards of Perfect Quarters is seeing the uptick in short sales in 10469. She believes the area has suffered from widespread mortgage fraud, and many homeowners are struggling with option-ARM loans far above what they can afford.
"There’s more short sales for sure," said Edwards. "The majority are people I spoke to last year who were in denial and trying to do loan modifications."
In Brooklyn, two ZIP codes that cover Bushwick, Bedford-Stuyvesant and East New York led in short sales for the first quarter, and also had among the highest percentages of foreclosures in the borough.
Short sales are rising in part because many cash-strapped sellers are not obtaining modifications through the government’s Home Affordable Modification Program, or HAMP — or the mods aren’t effective.
The federal government has also encouraged short sales this year with incentive payments to loan servicers and banks. Banks, meanwhile, are taking the losses and approving short sales to avoid the cost and hassle of foreclosures.
What’s more, New York state has an exceptionally long foreclosure cycle, which gives more time for the seller and bank to hammer out a short-sale deal. In New York, the average foreclosure process can last more than 450 days, according to Rick Sharga, senior vice president of RealtyTrac.
He contrasts that to Texas, which he said has the shortest cycle in the nation at just 21 days, leaving little time to arrange a short sale as an alternative to a foreclosure.
The spike in short sales in certain New York City neighborhoods will put continued downward pressure on housing prices there. Some real estate experts expect the trend to dampen the wider metro area’s recovery, too, as they become more common throughout the city as a whole.
In addition to selling at a discount, short sales often take several months longer to close than traditional sales, dragging out their time on the market.
"There tend to be more severe discounts associated with them, and as the volume goes up, it serves to temper the possibility that housing prices will head upward over the next few years," said Miller.
While acknowledging the hits to pricing and inventory levels, RealtyTrac’s Sharga also noted that short sales help the market work through troubled inventory. They allow homeowners to exit properties they cannot afford.
"Along these lines, it’s probably a good sign to see an acceleration of short sales, as it gives the marketplace a chance to get through this correction," said Sharga.