New York is a tough town, and for lenders the metropolitan area's housing market is one of the toughest in the country.

The metropolitan area's economy has been jolted by heavy layoffs on Wall Street and a proposed budget for New York City that includes $1.1 billion in cuts, the sharpest since World War II.

The woes have clearly extended to the housing market and mortgage lending, prolonging a slump that began in the late 1980s.

People not buying isn't new this year, said Ken Wohst, executive vice president at Chemical Residential Mortgage Corp., Edison, N.J., a unit of Chemical Banking Corp. They also weren't buying in 1990, 1991, 1992, 1993, and 1994, he said.

The area's only growth segment now is first-time homebuyers, Mr. Wohst said. Refinancing and trade-ups have not increased in the last 15 months, he noted.

The number of new mortgages for home purchases in the New York metropolitan area declined 21%, to 7,500, in the fourth quarter of 1994, according to TRW Redi Property Data, a real estate information company in Riverside, Calif.

Much of the problem stems from Wall Street firms, which have cut their staffs sharply in response to slumping markets.

"The greatest impact on income levels and consumer confidence comes from the financial sector in the city," said Rae Rosen, an economist with the Federal Reserve Bank of New York.

Salaries are higher on Wall Street than in other sectors, she said, so the ups and downs of the industry can have disproportionately large effects on the local economy.

Wall Street, however, is not the only issue.

The metropolitan area's housing market also been hurt by cutbacks at Grumman, the big defense contractor, and International Business Machines.

"The region is grappling with a slew of problems," said Mark Zandi, who is chief economist at Regional Financial Associates, West Chester, Pa.

In fact, New York has one of the weakest economies in the country, Mr. Zandi said. Only Washington, D.C., and Honolulu are weaker, he said.

And he for sees no recovery in New York anytime soon.

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Mortgage loan applications in the week ended April 21 were off 0.5% from the preceding week, according to the Mortgage Bankers Association of America. The decline from the year-earlier level was 18.4%.

Refinancing gained ground on purchase loans. The association's refinance index climbed to 64.7, from 59.4 the previous week. A year before the index stood at 121.6.

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