"The biggest impact for us has been a lot of negative pressputting a chill on the buyers," says Sidney Whelan, a broker withHalstead Property in Manhattan. "That's nothing new for us."

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Currently, Whelan is pre-selling units at the Bridges, atwo-building condominium at 2279-2283 Third Ave. near 124th Streetthat's scheduled to open in 2008. "It's certainly a challengebringing a condo on right now because buyers are a little spooked,"he says. "That's something we have to address with every customerthat comes in, but we are getting a lot of traffic. Regardless offears, many view purchasing in Harlem as a wise investment."

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Brendan Aguayo, head of business development at Aguayo &Huebener Realty Group, agrees. "I think in general that the presshas done more damage than what actually happened" in the creditmarkets, he says. "A lot of people got scared. If a buyer getsscared, it creates a domino effect."

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Arthur Collins, co-founding principal of Collins Enterprises,also maintains that media reports are "making a big deal out ofsomething that is pretty well contained." He says that despite anytroubles, real or perceived, "The New York market is prettyresilient and strong" and hasn't been affected as much as otherparts of the country by the subprime meltdown.

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Still, a sharp rise in foreclosures and subprime lenders filingfor bankruptcy can't be completely overlooked and lessons have beenlearned, brokers say.

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From the standpoint of development, the subprime meltdown haseliminated a huge number of banks that were in the constructionlending business, says Norm Kaish, managing partner of Kaish andTaub Development Group.

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When the extent of the subprime crisis became clear this pastsummer, "We had cancellation of a land acquisition loan with DillonRead, a private banking division of UBS AG," Kaish says. "We weredoing assemblage in Gramercy Park. We had completed part of theprocess and Dillon Read went out of the lending business for realestate. Shortly after that occurred, we started running to otherbanks to fill our needs for the completion of the assemblage and wefound banks willing to make the loan. Then UBS came back to us andoffered to complete the assemblage as well provide mezzanine andconstruction financing.

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"We spent a number of weeks providing them with all the infonecessary to secure those loans, and we were able to finalize theloans to complete those assemblages to the land acquisition," Kaishcontinues. "In mid-October, UBS said they were writing off $3.6billion of their debt and cancelled all construction applicationsthat were pending. We lost $94 million in construction loans."

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Still, Ari Shalam, senior vice president of acquisitions atTaconic Investment Partners, points out that rental or sale productfor middle-income residents is a challenge for developers. "Thereare lot of things pushing people to the edge right now," he says.It's much easier for developers to focus on low-income housing andbuild with tax credits or go for high-end residential properties,leaving the hard-to-define middle class multifamily market on thebackburner, adds Shalam.

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Underwriting criteria in banks have also changed, says Peter VonDer Ahe, director of the national multihousing group of Marcus& Millichap Real Estate Investment Services in New York."Before the adjustment in the lending market occurred you couldeasily get interest-only loans at one-to-one coverage ratio," hesays. "That's pretty risky because if the building doesn't make it,the payments to the bank are still the same. It has to come out ofpocket."

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Loans under those terms are no longer available, says Von DerAhe. "The debt coverage ratios have expanded while the underwritingcriteria have become more stringent and brought some normalcy," headds. "You can still get 6% loans, but the banks are not going tolend you as much. The buyers are going to have to come up with morecash out of pocket."

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To prevent foreclosures, brokers on the selling end are payingeven more attention to prospective buyers. While many buyers willstill fit the desired profile and move swiftly through the closingprocess, other would-be residents may not have belonged in themarket even before the subprime meltdown.

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"We're looking at very fiscally conservative buyers," saysWhelan. "They go for conventional 30-year fixed loans and have highcredit scores. A broker will know pretty quickly whether a buyer isgoing into jeopardy or not. Responsible brokers will tell people,'This isn't for you.' It's a disservice to my seller if I get theman offer from someone is going to crash and burn."

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He calls use of the subprime mortgage "a risky thing. It wasonly ever good for people who did have high earnings and werereally sophisticated about finance and real estate. It was never agood product to use simply to get your monthly expenses reduced inthe short term. That's where it got people into trouble."

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Aguayo says he hasn't seen any meltdown fallout, but that's"because there haven't been any buyers who haven't beenpre-approved" at the group's latest development in Brooklyn's ParkSlope neighborhood, the Vue at 162 16th St. "At all of our newconstruction we have mortgage brokers who are more stringent inwhat they're requiring," he says. "They want a high credit rating.In some cases, I think they're asking for a larger down payment ifthe score is lower than what they would like."

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Stephen Kliegerman, executive director of marketing for HalsteadProperty, says his company is working with Wells Fargo on-site."We're pre-qualifying buyers and counseling buyers, talking to themabout going to family members and getting credit assistance so thatthey don't run into problems," he says.

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This also helps sellers weed out undesirable candidates. "Thereare people who, regardless of the subprime market, would still beborderline," Kliegerman says. "Developers may not have done a dealwith those people anyway based on economic status."

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Kliegerman feels that the meltdown has had more of an effect onthe single-home market, "where there is no gatekeeper," than onmultifamily. "In the single-home market, there's no developer thathas tens of millions of dollars at stake and no on-site bankerpre-qualifying," he says. "In New York City, we haven't seen a lotof the predatory lending that affected the subprime market. Thebuyers tend to be a little more sophisticated and go with moreestablished brokers. When you're out in a less sophisticated marketyou'll see signs for teaser interest rates, but in Manhattan we'llask the buyers who they've been pre-approved by; we'll ask them tobe approved by our banks."Von Der Ahe thinks the market will alsosee a "slowing of velocity. Buyers are becoming more choosey interms of quality and location."

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If people are liquid enough, says Collins, there will be enoughgood properties to choose from at fairly reasonable rates. "Therewill be some foreclosures and banks taking back, and it's really amatter of where's the bottom in terms of the pricing for thisstuff," he says. "We found that things are going to be moving onthe very low end and very high end."

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Cancelled loans, abandoned dreams of homeownership--has anyonebenefited from the subprime meltdown? Of course.

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"Subprime is probably good for the rental market," says Shalam."It will mean more renters, fewer buyers. The halo effect is areally strong rental market across the city that will cause someowners to think twice about converting rental properties. Thismight absorb some of the planned inventory that was coming to themarket."

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As homeownership is pushed further out of reach, more pressurewill be placed on rents. "That's an interesting point," says VonDer Ahe, "because in past credit meltdowns, you've also had economytroubles and you had to lower rents. Now rents are actuallycontinuing to go up."

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Figures in a recent apartment research report by Marcus &Millichap support this prediction. According to the report,"Employers are expected to add 52,400 positions by year's end, a1.4%-gain and up from 46,200 new hires in 2006; asking rents in themarket-rate rental sector are expected to rise 5.5% to $3,622 permonth by year's end, while monthly effective rents will advance5.8% to $3,528 per month; and the median price of properties soldover the past year is $228,300 per unit, a gain of 16% from thepreceding 12 months."

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It remains to be seen whether the impact of the subprimemeltdown on New York City's multifamily market will havelong-lasting effects or if those effects truly exist on a greaterscale. "This sounds like spin, but we really have not seen anegative effect from the fallout in the rest of the country,"Kliegerman concludes. "It's been more isolated to other markets inplaces where people are not so sophisticated."

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