It would seem the East and West coast went different directions as new reports show just how different the two nation’s end cities really are.
Home prices in New York are now 13% below the 2006 peak, however San Francisco is just the opposite with home prices reaching 15% above the 2006 peak, according to Fitch Ratings latest quarterly U.S. sustainable home price report.
The similarities are obvious: large metropolitan areas near to the coast with limited ability to add new housing inventory, according to the report. What, then, is causing the markets in these cities to be so different?
The answer actually is not the housing market at all, but rather, income growth. After hitting rock bottom in the housing crisis, San Francisco’s income grew at a much more rapid rate than New York’s.
“San Francisco’s growth has roughly doubled that of New York’s in recent years,” said Fitch Director Samuel So.
Since hitting their lows, San Francisco’s income increased by 21% whereas New York’s increased by 11%.
Another difference in the two cities is the post-crisis distressed inventory, according to the report. Whereas in San Francisco inventory increased rapidly from 2007 to 2010 before returning to pre-crisis levels in 2014, New York’s distressed inventory remains high. In fact, distressed inventory in New York is about three times higher than it was in 2007, with no hope of relief until well into 2018.
The main cause for this difference is the foreclosure laws in each state, according to the report.
“In California, foreclosure sales can be initiated without having to file a lawsuit or go to court, actions which are required in New York,” So said.