How Much Will Homes Appreciate In Five Years?

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If you’re considering the purchase of a home, you may be asking yourself the following question: How much will homes appreciate in five years? I will try and breakdown the Long Island and come up with an outlook that makes sense.

First, Macro Markets LLC, a financial technology company, has interviewed more than 100 housing industry experts to project housing prices through 2015. The outlook from this survey is positive, projecting a 10% increase in home values through the next 5 years.

However, this is a national survey. For Long Island, the outlook may be a little different. One of the main things I’d like to focus on is the distressed property market here locally. Additionally, with the data I’ll be releasing in about a week or so, which will show how many homes were sold last month (April) vs Inventory of homes for sale, I think will also indicate that Long Island has some major hurdles to clear before seeing 10% appreciation by 2015 mainly because inventory continues to be very high over the monthly sales (about a 10 to 1 ratio – 10 available homes vs 1 sale).

Distressed Market: New York

Some information would have you believe that distressed inventory (foreclosures and short sales) are not impacting the Long Island/New York area like this graph above. The problem with this graph is, it’s not telling the full story. For instance, New York is considered one of the slowest states to actually be able to foreclose due to the laws and court systems. Additionally, laws in New York are very pro-tenant, so it is a long process to evict occupants who remain in a foreclosed home after it is repossessed by the bank.

As you can see, New York is the fourth slowest state in terms of getting homes foreclosed. What this is doing is prolonging the stay of the people in the home who are not paying their mortgage. Now I’m not saying people should be thrown in to the street nor am I downplaying the devastating impact on the family structure. But for the purposes of demonstrating how the Long Island real estate market’s distressed home inventory is affecting home prices, it’s information that is important to note.

Now given the other two pieces of this puzzle, the next is very concerning.

This graphic above is showing a state-by-state look at the number of homes that are current, 30 days, 60 days or 90 days behind or more on the mortgage. This is provided by Core Logic and the darker blue shades demonstrate 90 days or more late concentration. I enlarged the Long Island area. From there you can clearly see that we have a long way to go toward clearing out or correcting this major challenge to our local real estate market.

Bottom Line

It’s not all bad information, but it’s important to get the full picture of what is going on in our local real estate market. So with industry experts predicting a 10% increase in home values over the next 5 years, I think it’s safe to say that Long Island could see a more moderate incline of 5 to 8% by 2015. The Long Island market is and will continue to correct itself and the inventory vs sales numbers will continue to improve as the economy continues (hopefully) to rebound, slowly and steady.