LI Housing Update

by Scott Feldman

There is good news and not so good news on the housing front. The Long Island Association, the area's biggest business group, says median home prices since the peak in housing values in 2007 have dropped 18 percent in Nassau and 20 percent in Suffolk. Back in August 2007, the median home price in Nassau was $502,500 compared to $410,000 in November 2008. In Suffolk, median home price for June 2007 was $420,000 versus $335,000 for November 2008. So where are home prices headed? LIA Chief Economist Pearl Kamer is forecasting another 15 percent decline before the market bottoms out at around 35 percent. Now for the good news. Long term mortgage rates are around 51/2% today. Kamer thinks action by the Federal Reserve could knock that down to 41/2%. If 30 year rates get that low, combined with lower home prices, Kamer says that would make a more attractive market for potential buyers. But there is a big IF. The risk, she tells me, is that layoffs will accelerate and if more people lose their job, low interest rates won't help prospective buyers qualify for a mortgage. Kamer's crystal ball sees the housing market stabilizing by the end of this year or sometime next year. Of course, realtors are touting low home prices and low mortgage rates as the perfect reason to buy NOW. If you are a seller, realtor Fern Karhu says the key is pricing your home right. Listen to your realtor. Get comparable prices of homes that have sold in your area in the past three months. As for buyers, you've also got to check what homes are selling for in the neighborhood. But, at the same time, there's no point to making a ridiculously low offer to the seller. Karhu says prices will rebound over time. But, the days of double digit increases Long Island experienced in the past, are just that, history.

Comments

[John]

While I feel sorry for people who bought property at the peak, a lower market benefits everybody else. This was a bubble engineered by Greenspan (to cushion the impact of the dot-com bubble), it caused inflation, and I think we have to face the fact that it's over.

Well, almost over. What does Kamer say about the commercial real estate market? My sources suggest that's going to be the next bubble to burst.