Manic Recession: Upside-Down Housing Market Driving Not Just New York Crazy

Mansions! Get your mansions hereya! (Getty)

One of the more confounding things about the recession has been the soaring housing prices at New York’s upper echelons. Prices for properties over $4 million have reached almost pre-Lehman levels. Consider Stone Philips or William Lie Zeckendorf’s recent flips, or the jaw-dropping buys of Igor Krutoy and Libet Johnson, as well as that other Zeckendorf sale.

As The Observer has explained before, and The Journal notes once again today, a confluence of factors, namely topsy turvy financial markets, the weak dollar and limited supply have made New York an ideal place to sink one’s money. While the Manhattan low-end and the outerboroughs still languish (see: non-existent mortgages, anxious buyers) it’s better than ever to be rich, it seems. And it turns out New York is not the only housing market to enjoy this backwards boom.

The Associated Press has a big report out about the “bipolar housing market” in America, where “it’s starting to feel as if there are two housing markets.”

In the housing market inhabited by most Americans, prices have fallen 30 percent or more since the peak in 2007. That’s a steeper decline than during the Depression. Some people have had their homes on the market for a year without a single offer. [snip]

But then there is the other housing market, occupied by 1.5 percent of the U.S. population, according to The one with outdoor kitchens and in-home spas; with his-and-her boudoirs and closets the size of starter houses. The one that is not local but global, with international buyers bidding in all cash. And where the gyrations of the stock market are cause for conversation, not cutting expenses.

In this land of luxury properties, the Great Recession seems over. Prices of $1 million-plus properties have risen 0.7 percent since February, according to Zillow. Prices of houses under $1 million have fallen more than 1.5 percent.

Normally, these two segments of the housing market rise and fall together. But now, they’re moving in opposite directions.

The scary thing is, when the market evens out, will this mean a bubble in luxury housing when all the wealthy, foreign and domestic, decide to pull up stakes and pursue bigger investments?

Manic Recession: Upside-Down Housing Market Driving Not Just New York Crazy