Foreclosure listings in New York are expected to include condo units at the Rector Square in Battery Park City after Anglo-Irish Bank decided to file another lawsuit to complete its foreclosure case in New York State Supreme Court against Yair Levy, the develop, in August. It said that it wants to sell the project to another investor so that the condo conversion can be comrepleted.

The original lawsuit was filed by the bank in February, claiming that the developer was not able to pay his $165 million loan which he obtained to convert all the 304 rental units of the Rector Square building into condo units. The suit also alleged that Levy failed to pay common charges, contractors? fees and pilot rental fees to the Battery Park City Authority, which owns the ground lease of the rental building.

In response to the first lawsuit, the developer filed his own lawsuit in Nassau County, his place of residence, claiming that the bank forced him into default because it failed to provide the needed construction money on time.

State and local investigators of the reserve fund of the Rector Square complex issued subpoenas to the said bank to respond to Levy’s accusation. They also stated that the fund was already depleted and that the accounting for the expenses was not clear. According to some reports, state and local officials asked Manhattan District Attorney Robert Morgenthau to get involved in the investigations.

Trust lawyer Michael Miller was later appointed receiver of the Rector Square and he appointed Related Companies to be the new managing firm of the building. Within 3 months, Miller has completed building some of the common areas and managing agent Related Companies has rent out around 40 of the apartments which were not yet renovated and converted into condo units.

On July 31, the New York Attorney General approved a revision to the building’s condo offering plan. Under the new amendment, buyers who bought their apartments before the approval of the new amendment have the option to cancel their purchases and get a refund of all their initial payments.

In New York history, Rector Square was the first and biggest operating condo building that was foreclosed. There were other condo buildings that were foreclosed, such as the 80-unit Jasper, but they were not yet occupied.

In early August, Levy’s other condo conversion project Sheffield57 also went into foreclosure after his partner Kent Swig failed to pay over $100 million in construction and mezzanine loans.

In the second quarter of this year, the average sales price of a Manhattan apartment dropped from $1,669,720 in last year’s second quarter to $1,312,920, with prices falling by 21 to 24 percent.

The median price for apartments dropped by more than 18 percent to $835,700 compared to last year’s second quarter.

Meanwhile, sales prices for existing apartments, including foreclosure apartments, fell by more than 25 percent to $725,000 compared to last year’s second quarter. Compared to the first quarter however, the prices of pre-owned apartments rose by more than 7 percent.

While sales of newly-built apartments fell by over 50 percent compared to last year, sales of existing apartments, including foreclosure list apartments, increased by more than 28 percent, compared to this year’s first quarter.

Housing analysts said most of the price drop occurred in the last months of 2008 when the lack of residential credit was at its worst level.

A Manhattan real estate analyst said he expects sales of existing apartments, including foreclosure list apartments, to increase in the following quarters because of low foreclosure list prices.

Manhattan was previously immune to the foreclosure crisis that started in the last months of 2006 because of strong Wall Street activity. But the recession worsened, causing many Wall Street companies to collapse and many financial executives to get laid off or take substantial pay cuts.

Market analysts said New York City experienced an abrupt decline in home prices when the city’s large private corporations laid off large numbers of professionals.

Although business collapse in the metro area has largely slowed down, unemployment rate in the area in May reached 9 percent, the city’s highest since 1997, based on records from the New York State Department of Labor.

One real estate executive said prices of homes, apartments and foreclosure list properties have already taken a significant fall, so he does not believe prices would go down further by double-digit percentages.

He said many prospective home buyers will realize that the rise in mortgage rates will offset further price declines, so they will make their home purchases now.

Moreover, he said sellers are now willing to further reduce their pre-owned prices including their foreclosure list prices by a further 8 percent to shorten the number of days resale apartments stay in the market.

Housing analysts said that New York developers thought that condo developments in New York, especially high-end condo properties in prime locations in Manhattan, would be immune to the effects of the foreclosures that battered other cities.

But they were wrong.

When Wall Street collapsed because of the mortgage-backed securities crisis, many high-income financial executives who were expected to buy the high-priced condos suddenly found themselves without jobs.

Last year, as other cities suffered from bargain foreclosure list prices, New York condo developers still held expensive parties to launch and sell their condo complexes.

But soon, the parties stopped after financial executives either received pay cuts or termination slips. There were no more financial hotshots to buy the condo units, as financial institutions like Bear Stearns and Lehman Brothers collapsed.

Rick Hoffman, a senior vice president for high-end broker Corcoran Group, said the foreclosure crisis downed Wall Street and New York’s high-end real estate sector.

In April, sales of new condo units fell by an overwhelming 71 percent compared to April 2008, as condo developers refused to reduce their prices even if foreclosure list prices and other property prices were falling down around them.

Jonathan Miller, market analyst for real estate firm Prudential Douglas Elliman, questioned the wisdom of retaining high prices when the market is demanding for correction. He said that more condo units will ultimately end up in foreclosure list inventories if prices are not adjusted to be competitive with other developments.

Housing analysts have observed that some cities of states battered by foreclosures such as California, Nevada and Arizona have been showing signs of recovery because their markets have made the needed price corrections. Their low foreclosure list prices have attracted groups of first time homebuyers and investors, cutting down large portions of foreclosure inventories.

One problem of condo developers in New York is the complicated mortgage loan structures they obtained to be able to design and create glass towers that appeal to high-income financial hotshots. Now, the developers are facing difficulties in getting approvals from their lenders to reduce unit prices.

Without significant price reductions, New York condo units would not sell. They would instead be added to foreclosure list inventories.

For Q2, the maximum number of notices of default were sent out to residents in Queens, while Brooklyn followed it closely behind. Staten Island added almost 800 foreclosures to foreclosure listings in New York, while 234 come from Manhattan.

In New York City, on the whole, almost 5,000 borrowers defaulted on their mortgage payments while almost 800 were confirmed for home auction sale, and 653 had to give up their homes in lieu of their inability to pay back the loan. A quick look at New York foreclosure listings is enough to tell us that maximum number of foreclosures came from Queens, followed by Staten Island, Brooklyn, Bronx, and Manhattan. Bank foreclosures also witnessed a steep hike. Elsewhere in the state, foreclosures have been on the rise as well.

Today, if you want to buy or invest in a NYC apartment, foreclosed homes are the best option. Available at discounted rates, you can simply look them up in the New York foreclosure listings and get in touch with an online foreclosure broker to help you seal the deal on your home.