Western New York’s economy held up well during the recession, although the recovery has been sluggish. But growth is likely to remain slow in the region because of weak consumer confidence and a surprising backlog of home foreclosures, a Federal Reserve economist told a Buffalo gathering Thursday.
Speaking to the local chapter of the New York State Commercial Association of Realtors, senior regional economist Jaison R. Abel said upstate New York has benefited from a “less volatile industrial structure,” more stable housing and better household finances.
As a result, while the United States as a whole suffered during the recession – and states such as California, Arizona, Nevada and Florida were hammered – upstate New York, including the Buffalo Niagara region, generally fared better in employment, home prices, indebtedness, financial stress and other areas.
In particular, it’s well-known that upstate didn’t experience the surge in bad mortgages and foreclosures that other parts of the country did.
Still, the recovery has not been as strong as it should be, Abel said. An index of state economic activity showed 1.7 percent growth from December 2011 to December 2012. That’s half of what it should be, he said.
“The economy upstate and especially in Buffalo really did perform relatively well through the Great Recession,” he said. “But since the recession, it’s been a really sluggish recovery.”
With employment, for example, New York now has more jobs than before the recession, unlike nationally. Buffalo “saw a sharp rebound early in the recovery process, but we’ve seen some weakening in the economy in the past year.”
“On a positive front,” Abel said, “New York State is still projected to grow, but the rate of growth is projected to slow.”
But the volume of loans stuck in foreclosure here is growing steadily, threatening to overtake the U.S. rate and hold back the future growth of the region.
Unlike some states, New York uses a “judicial foreclosure” process, where state courts must be involved in every step of the home-seizure process. That slows down the pace, which benefits homeowners fighting to stay in their houses. “The fact that it takes a bit more time means you might have some more recourse during the foreclosure process,” he said.
However, it also means the mortgages and homes remain stuck in foreclosure proceedings for much longer – an average of 503 days in New York from 2010 to 2012, versus 318 nationwide. In turn, that prevents lenders and loan servicers from getting the loans off their books. Moreover, when a home is in foreclosure, there’s less incentive for a homeowner to invest in and maintain it, which brings down its value and the value of those around it.
“It’s one issue that we’re paying attention to, and it could provide a head wind to a recovery that’s on the way,” he said.
Consumer confidence remains weak, he said. “People are just less confident overall,” he said, “and that’s even more the case in Buffalo.”