Jaison R. Abel, Jason Bram, and Claire Kramer
At today’s regional economic press briefing, we provided an update on housing conditions as well as an initial assessment of superstorm Sandy’s economic impact on the region.
The housing sector is an important part of the overall economy, and it has played a key role in shaping the Great Recession and the recovery that has followed. While our region was largely spared the worst of the housing bust, many households—particularly in northern New Jersey and areas around New York City—continue to feel its economic consequences. Fortunately, housing conditions here have begun to show signs of steady improvement. Home prices in much of the region have gradually increased throughout the year and other measures of housing-related activity appear to have stabilized, albeit at low levels. In addition, indicators of housing-related financial stress that we monitor appear to have eased somewhat in recent months. Taken together, these trends suggest that many of our region’s housing markets have reached an important point in the recovery process. At the same time, it’s important to recognize that housing conditions in the region’s most depressed markets remain sluggish. In addition, owing in large part to the long foreclosure process in New York and New Jersey, our region faces a large and growing backlog of foreclosures. So, while there have been some encouraging signs in our region’s housing markets this year, going forward there are still some significant challenges to broadening and sustaining the recovery that’s under way.
One immediate challenge is rebuilding and recovering from Sandy. Geographically, it appears that the hardest-hit areas were the coastal communities of Queens, Staten Island, Brooklyn, Long Island, Lower Manhattan, and the New Jersey shore. Physical damage to the region was primarily to homes and personal property, commercial property, and infrastructure. An immediate housing priority is the provision of shelter to those whose homes were severely damaged. As such, housing task forces have been formed to identify local housing needs, catalog vacant rental housing units, and investigate temporary housing options. On the business front, the focus has been on securing gap financing for firms to finance short-term cash flow while they restart their operations and await insurance settlements.
In assessing the impact of natural disasters like Sandy, it’s important to recognize that some activity that appears to be lost may in fact only be postponed or shifted elsewhere within the region. Moreover, a surge in economic activity typically follows a natural disaster as the region rebuilds much of the damaged or destroyed property and infrastructure, often with resources from outside the region, like FEMA assistance and private insurance. At the same time, welfare losses resulting from the pain and suffering of people who lost homes or loved ones, as well as inconveniences like extra time spent commuting, are often neglected when assessing the impact of natural disasters such as Sandy.
For more information on housing conditions and Sandy’s economic impact on the region, see the regional economic press briefing webpage.
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
Jaison R. Abel is a senior economist in the Research and Statistics Group of the Federal Reserve Bank of New York.
Jason Bram is a senior economist in the Research and Statistics Group.
Claire Kramer is a regional outreach manager in the Bank’s Communications Group.