Building Bust

And the slow, steady decline of the New York City building boom officially begins:

 

After seven years of nonstop construction, skyrocketing rents and sales prices, and a seemingly endless appetite for luxury housing that transformed gritty and glamorous neighborhoods alike, the credit crisis and the turmoil on Wall Street are bringing New York’s real estate boom to an end. […]

 

It is hard to say exactly what the long-term impact will be, but real estate experts, economists and city and state officials say it is likely there will be far fewer new construction projects in the future, as well as tens of thousands of layoffs on Wall Street, fewer construction jobs and a huge loss of tax revenue for both the state and the city.

 

Ominous Ripples

I have, at best, a marginal understanding of the varied sources cities tap to fund services, expand infrastructure, etc, but it appears the municipal bond market was another overly clever Wall Street “product”, making money where none existed. (See “Big Shitpile”)

 

Analysts said the dysfunction in the municipal bond markets appeared to signal the end of an era of relatively cheap money for governments and, probably, the start of an era of tough choices for communities. When the market starts moving again, they said, it will look a lot like the municipal bond market of 10 years ago, before the arrival of financial wizardry in the form of structured-finance products, which lowered borrowing costs but added big new risks. […]

 

Municipalities will probably be able to function, but may not expand services, said John V. Miller, chief investment officer at Nuveen Asset Management, a municipal bond investment firm. “For some, the level of service they provide will decline.”

 

Some governments, already straining to balance their budgets, will have to cut payrolls, he said, and others may decide to raise taxes. […]

 

Looks like the beginnings of some un-fun times for American cities, and quite a challenge for our next President. Going to be interesting times…