New York City’s housing market is poised to lag behind other markets for the next two years even as a national recovery in real estate continues.

That’s the assessment of Capital Economics Ltd. Property Economist Paul Diggle and assistant Michael Pearce, who in a Jan. 28 report said “conditions look less amenable to rising prices in New York City, particularly in Manhattan and Brooklyn.” By contrast, average U.S. prices may gain 5 percent a year, they said.

Enlarge image

New York City Housing Trails National Rebound

Andrew Harrer/Bloomberg

Housing in the region that includes New York City is 4 percent overvalued relative to rents and 2 percent overvalued relative to incomes.

Housing in the region that includes New York City is 4 percent overvalued relative to rents and 2 percent overvalued relative to incomes. Photographer: Andrew Harrer/Bloomberg

3:15

Jan. 29 (Bloomberg) — Karl Case, co-creator of the S&P/Case-Shiller index of property values in 20 U.S. cities, talks about the housing market. The S&P/Case-Shiller index increased 5.5 percent in November from a year ago, the biggest year-over-year gain since August 2006. Case speaks with Tom Keene and Michael McKee on Bloomberg Radio’s “Surveillance.” (Source: Bloomberg)

6:45

Jan. 25 (Bloomberg) — Susan Wachter, a professor at the University of Pennsylvania’s Wharton School, and Keith Jurow, author of a report on the U.S. housing market for Minyanville, discuss the outlook for the housing market. They speak with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

4:14

Jan. 24 (Bloomberg) — Robert Shiller, a professor at Yale University and co-creator of the S&P/Case-Shiller index of property values, talks about the global economy and the U.S. housing market. He speaks with Tom Keene on Bloomberg Television’s “Surveillance” on the sidelines of the World Economic Forum in Davos, Switzerland. (Source: Bloomberg)

Housing in the region that includes New York City is 4 percent overvalued relative to rents and 2 percent overvalued relative to incomes, they estimate. Nationally, housing is 6 percent and 21 percent undervalued respectively, they estimate.

The economists compared average home prices in the New York region and nationally with average incomes over the past two decades to determine whether prices now seemed too high or low.

“Data on the level of house prices in Manhattan suggests that the average resident has to fork out seven times their annual income to buy in the borough,” they wrote. “The equivalent national figure is probably less than six.”

A potential crackdown in regulation of the financial services industry poses a threat to Wall Street, which may hurt housing prices for area residents, the authors said. Capital Economics’ U.S. housing department was the top forecaster of U.S. housing prices in the two years ended Feb. 1, 2012, according to Bloomberg Rankings.

“Regulatory uncertainty, not to mention macroeconomic instability emanating from problems in the euro-zone — which we don’t think are over — will constrain profits in the financial services industry and limit wage growth in NYC,” they wrote. “Domestic buyers will also not be helped by tight lending conditions” for larger-than-standard mortgages.

Finally, New York state continues to suffer from one of the largest backlogs of foreclosures in the U.S. About 6.5 percent of mortgaged properties in New York state were in the foreclosure process during the third quarter of last year, the fourth-highest of any state and well above the national rate of 5 percent, according to Capital Economics. The report said a foreclosure in the state typically takes three years to complete, the longest in the country.