mortgage problems with new construction

1. it depends on your purchase agreement and offering plan. In many cases, there is a default-by date, after which the purchaser lose their rights with regards to purchase, the builders are allowed to keep the 10% deposit, and they can reoffer/resell/rent the unit(s) with impunity.

2. in most cases, yes - no mortgage contingencies are allowed.

3. yes, true.

4. yes and no. depending on your credit, amount down, liquid assets, etc, you can pay to purchase a much longer lock period - up to 270 days in some cases (we have done this in the past). Or, you can purchase a lock, and then buy extensions (we have also done this in the past).

5. I don't think you'll see alot of defaults on NYC condos, at least not in prime areas south of 96th. And the implications are - happy builders (they get to keep the 10% down no matter what and they STILL own the unit), who can then resell (if they wish) at whatever price they feel appropriate, or they can rent those units out also as well and sell whenever they feel the time is right.

"And the implications are - happy builders".

That's quite an optimistic perspective.

In my honest opinion, the bottom line is:

Mortgage Crisis = Unhappy Builders. It is what it is.

Sorry, but I can't swallow the reverse.

In other words, I seriously doubt these builders are reading the news right now and licking their chops thinking about how happy they are going to be for the reasons you mention (trust me, they've done this analysis in much greater detail).

My guess was that some condo developers were over-extended under pre-meltdown levels and post- meltdown some could even default on projects or face bankruptcy.

I remember this very thing happened in the late 1980s and early 1990s. Banks took over projects and their bargain pricing influenced a decline in the overall real estate market.

Some new construction developers have close to a dozen projects ongoing at the same time, and some are financed with private equity firms; whose debt loads and liquidity are also drying up fast.

If a buyer thinks the market is dropping over their deposit amount (5%, 10% or 15% depending on the purchase phase), then they may deem it wise to back out. Especially, if they think their condo building may not be finished (properly).

I am happy I did not sign a purchase contract on new construction the past few months. I bought an established unit instead and have my worries about that too.

Many of today's developers are fairly new in the game and not established over decades and market cycles.

Those old guys like myself remember the boom bust times of the 1980s and 1990s. I am sure many will learn those (hurtful) lessons from those earlier times here.

I, too, am a tenured member of the "I was in NYC in the late 1980's" club.

And I agree in retrospect with your assessment that some builders are indeed over leveraged. I think that some poorly capitalized/financed builders will most certainly find themselves in a severe credit crunch that will force them to unload their properties or just go bankrupt. On the other hand, MMAfia's assertion that 'Mortgage Crisis = Unhappy Builders' does not reflect the whole picture, either. It's case-by-case basis, and not just a single broad generality.

My wife and I just closed on our place (after two years of waiting - a new build) two days before the big mortgage rate bumps happened. Regardless of the larger alt-a/subprime/real-estate-values-will-go-down scenario, we're really super happy with our joint. But then again, I've been through the late 80's/early 90's Manhattan real estate thing as have you, and we plan to live here until they take us out feet first (many, many, MANY decades from now, hopefully!). So the next 3/5/7 year Manhattan real estate scenario wasn't as important to us as was the vary long term 20+ year horizon, and honestly, anybody who thinks they can predict where we'll be in 20 years or more should be slapped upside their head so hard that their ears ring.

Developer’s Big Manhattan Move Faces a Time and Credit Squeeze
By TERRY PRISTIN

There is much speculation in the commercial real estate market that Harry Macklowe, the New York developer, is in trouble.

* Counting on a Hotel to Make a Neighborhood Hot

above article is in NY Times today.

How many NYC condo developers are highly-leveraged with funds coming from private equity and hedge funds?

My above guess may be starting to happen.