Market Conditions in 11755>Question Details

Jay, Home Buyer in New York, NY

What is the general consensus on the suffolk county housing market for the next few years. I know that NYC

Asked by Jay, New York, NY Mon Feb 23, 2009

housing in in big trouble and many of the experts are predicting another 30-45% decrease in values, how does that affect the homes on long island?

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7
As someone who does not make a living off of peoples perception of the housing market, I'd like to chime in. Over almost the entire measured history of home price averages, they have maintained fundamental ratios with average income. The exception being the last 10 or so years. As we all now know, this was due to lax credit standards, liar loans, ARMs, and the purposeful ignorance of all parties involved when money was being made.

You'll hear allot of people in the industry tell you that "this area is special"... These same people were saying that "home prices only go up" just a few years ago.... The fact of the matter is that no area is above the fundamentals of economics. Home prices must come into alignment with income levels. The measure for average home price in a given area has historically been around 3x the average income. Pick a town, look up the average income there, and multiply it by 3. That will give you a good estimate of where prices are going.
Web Reference: http://www.patrick.net
1 vote Thank Flag Link Thu Mar 19, 2009
Chris Murphy,
You say "The fact of the matter is that no area is above the fundamentals of economics. Home prices must come into alignment with income levels." That's just not true. I can cite numerous examples of real estate markets all over the world that have in the past defied the fundamentals and the alignment with income levels to levels beyond belief. You have an admirable grasp of some quite complex issues, but you are missing some elements of the bigger picture, hence your conclusions are flawed IMHO. Theory is all well and good, but it doesn't beat experience where the rubber meets the road. To that extent, rely on Carol Bromm's response below, she is working her sector of the market, all day, every day. I would add to that real estate is never going to be worth nothing. Unlike stocks and bonds, you are investing in real property - which is land, bricks and mortar, where the cost of construction is also a factor in market value, o what someone is willing to pay for it. I wish you well, but a little knowledge is a dangerous thing
0 votes Thank Flag Link Thu Mar 19, 2009
Chris Murphy,
You say "The fact of the matter is that no area is above the fundamentals of economics. Home prices must come into alignment with income levels." That's just not true. I can cite numerous examples of real estate markets all over the world that have in the past defied the fundamentals and the alignment with income levels to levels beyond belief. You have an admirable grasp of some quite complex issues, but you are missing some elements of the bigger picture, hence your conclusions are flawed IMHO. Theory is all well and good, but it doesn't beat experience where the rubber meets the road. To that extent, rely on Carol Bromm's response below, she is working her sector of the market, all day, every day. I would add to that real estate is never going to be worth nothing because you are investing in bricks and mortar and dirt, unlike stocks. I wish you well, but a little knowledge is a dangerous thing.
0 votes Thank Flag Link Thu Mar 19, 2009
If you are thinking of buying there hasn't been a better time; who knows what will happen tomorrow.

Anna
0 votes Thank Flag Link Thu Mar 19, 2009
You cannot predict Real Estate overall for the next few years. Every market is local and timely. What you see on TV is usually national statistics. Markets that went up rapidly (Phoenix, Las Vegas, Florida) have taken the biggest hits. Since it takes so long (years) for building plans and permits for large tracts of new homes, those areas overbuilt to meet demand that had dried up.

Historically, Real Estate prices average up about 4% per year. Like any commodity it's graph looks like a staircase. Real Estate usually leads the markets. When RE goes up, stocks follow, etc., and vice versa.

Manhattan finally took a downturn last year. Other currencies compared to the dollar were higher, so foreign investors were scooping up Manhattan Real Estate, sending NYers to the other boroughs such as Brooklyn. Once the dollar gained value, it dried up the foreign investment. Other parts of the country and the extended area had been down prior. It has also been stated that Manhattan is always the last to go down. If that is true, that means markets should be turning around.

When a home is purchased it normally takes 60-90 days before it closes. It is taking a lot longer now because lenders are a lot more cautious than they had been after getting stuck with so many bad loans. When the price is published after it closes, it could have been the result of an offer made 4-5 months before, which may be quite different than offers being received for like homes now. A trend has to be establshed so the experts can name the market. Remember in January 2009, they finally declared we had been in a recession since December 2007.

What I see in Suffolk right now- There are a few areas with a lot of foreclosures. Eventually, these homes will most likely be bought up investors and cleaned up for rentals. If the government intercedes to keep people threatened with foreclosure in their homes, there will be less homes ending up on the market. Markets are determined by supply and demand.

In most other parts of Suffolk, there are established communities that have spot foreclosures or short sales. There is about 1/3 less homes on the market now, than there was a year ago. There are also less potential buyers because of the stricter credit guidelines. Interest rates were at historic lows, but started to creep up a bit. The new $8000 tax credit for first time home buyers in the stimulus package signed last week has seemed to energize the market. Open houses last weekend were quite busy. Whether it is seasonal, or the start of a trend will take a while to determine.

Carol Bromm, SRES, CBR
Associate Broker
Prudential Douglas Elliman, Babylon
631 422-8269
0 votes Thank Flag Link Mon Feb 23, 2009
It doesn't. There may be fewer Wall Street bonuses to drop on a Hamptons Beach House, but that's not driven by the NYC RE market, it's driven by Wall Street. NYC and certainly the East End of Long Island are completely different markets. We have seen land prices hold firm throughout and we are now seeing a gentle increase for agricultural as people discover the benefits of buying farms. I appreciate you're asking about homes, not farms, but out here, they are often the same thing and in the current financial mess, there's something rather comforting about having enough land to grow your own food.
0 votes Thank Flag Link Mon Feb 23, 2009
Real Estate as an industry which is mostly influenced by the financial market - Banks, Stock Market- Private investors.
If and when the banks will ease their restrictiveness Real Estate will take-off
As we all know, in order to get a mortgage today from any banks you have to have 700+ in your FICO a 20% deposit and a good job which most people do not qualify.
My idea is not to bail-out the banks by injecting more $ in their coffers and not see the outcome but help people from loosing their houses and also help those who are willing to buy a house to get a very low interest loan from the government on the deposit and this will stimulate the Real Estate market.
0 votes Thank Flag Link Mon Feb 23, 2009
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