demand during a boom typically leads to rapid rises in prices and unregulated rents. eventually, of course, the amount of housing supplied responds to changes in demand. so, how did the economic expansion and contraction affect new york city ’ s housing market? for a mature city, the city saw an unusually strong boom in housing sales, construction and prices. this expansion actually began in 1996 and continued even in the aftermath of the 9 / 11 attack. since 2007, however, new york city ’ s market has turned down. this decline started later than the nation ’ s and prices have fallen less sharply. now, prices appear to have stabilized. this pattern can also be seen in manhattan ’ s rental market. after a long period of rising rents, the market weakened substantially from 2007 to 2009, and rents have rebounded moderately in 2010. new york city has not been spared from the high rates of mortgage delinquencies characteristic of this recession. manhattan ’ s delinquency rates are elevated although they remain markedly below the national average. by contrast, pockets of distress are much more prevalent in the outer boroughs, all of which have delinquency rates, per owner - occupied unit, above the national average. the relatively mild recession and the recovery in the city are lending support to both home prices and sales. also positive, compared with the rest of the country, are the city ’ s low mortgage leverage rates and a low share of homes with underwater mortgages. nevertheless, several risks to home prices in the city remain. these risks include the ongoing completion of a considerable number of new apartment buildings – ones that were started at the end of the boom. another risk comes from the slow pace of job growth in highpay sectors ( including the securities industry ) in new york city. finally, during the boom, prices rose substantially faster than rents. going forward, this disparity could exert downward pressure on home prices as renting has become a more affordable alternative. conclusion in sum, after a recession that was milder than in many parts of the country, the region is showing signs of a modest recovery in new york, but little growth elsewhere. the housing sector played a pivotal role in the recent national downturn. in the region, the fact that housing activity has a smaller weight in the regional economy helped to limit the recession ’ s impact on many communities. going forward, given housing ’ s significance to the well - being of people in our region and beyond,

economy can succeed without a high - quality see, for example, james m. poterba ( 1995 ), “ balanced budget rules and fiscal policy : evidence from the states, ” national tax journal, vol. 48 ( 3 ), pp. 329 – 36. see richard mattoon and leslie mcgranahan ( 2008 ), “ revenue bubbles and structural deficits : what ’ s a state to do? ” working paper no. 2008 – 15 ( chicago : federal reserve bank of chicago, july ) ; and david l. sjoquist and sally wallace ( 2003 ), “ capital gains : its recent, varied, and growing (? ) impact on state revenues, ” state tax notes, august 18. bis central bankers ’ speeches workforce, particularly in an age of globalization and technical change. cost - effective k - 12 and post - secondary schooling are crucial to building a better workforce, but they are only part of the story. research increasingly has shown the benefits of early childhood education and efforts to promote the lifelong acquisition of skills for both individuals and the economy as a whole. the payoffs of early childhood programs can be especially high. 7 for instance, preschool programs for disadvantaged children have been shown to increase high school graduation rates. 8 because high school graduates have higher earnings, pay more taxes, and are less likely to use public health programs, investing in such programs can pay off even from the narrow perspective of state budgets ; of course, the returns to the overall economy and to the individuals themselves are much greater. additionally, in a dynamic economy in which job requirements are evolving more rapidly than ever, individuals already in the workforce need opportunities to improve their skills throughout their lives. there are many ways to provide such opportunities. for example, community colleges and vocational schools train and retrain workers, often in close collaboration with private employers, and in many cases they perform this function at a relatively low cost. although helping workers acquire up - to - date skills is always important, it is especially critical now, when long spells of unemployment are threatening the longer - term employability and productivity of many. conclusion tonight i have highlighted some of the fiscal challenges faced by elected officials, both in new york and in other regions. in the past few years, the weak economy has significantly reduced government revenues, which in turn has forced governments to make difficult decisions on spending and taxes. an improving economy should help, but state and local finances will remain under pressure for some time. moreover, states and localities