Long Island Home Prices: Update March, 2010

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Long Island home prices have declined over the past four years now. It almost doesn’t seem real. Four years is a long time. And I think that it’s starting to finally impact every homeowner out there. We’re all feeling the effects of this unbelievable market. From Montauk into Manhattan, this “downstate”, Long Island real estate market has felt the burst of the bubble.

So when is this going to end?!

In December 09′s, The State of the Long Island Real Estate Market, I dove head first into a very accurate picture of where the market was headed. And overall, there were some promising numbers. Across Long Island, there was much less devastation to the market in terms of declining prices.

But as I look at the market for what it is, I see a few things.

First, there are so many homes that have been on the market for a long time. The same homes, not selling, month after month, year after year.

Secondly, I see a ridiculous amount of homes expire off the market (they don’t sell) and what these homeowners are simply doing are waiting for the exact moment (along with all the others like them) to put their home back on the market. This cycle will perpetuate one thing and that is waves of increased demand, which will not fair well for Long Island home prices.

The evidence will be in the numbers.

The following are statistics for February, 2010, followed by a graph of the overall market. I want to point out the numbers in paragraph form to emphasis the disturbing reality of the Long Island Real Estate market. In Suffolk county there were 11,767 homes for sale and 555 sales. 8,351 homes were available in Nassau, with 538 sales. In Queens county, 9,057 were available in February and 451 sales.

The total available inventory for Long Island was 29,175 residential units available for sale. The total number sold was 1,544.

Let’s pause for a moment and look at circumstances. February,2010 closings are an indication of December, 2009 inventory that went into contract (remember a home goes into contract, but it takes 1 to 2 months to close normally). Traditionally, home contracts decline in winter months. So the dip in homes sold doesn’t surprise me all that much.

However with mortgage rates so low, it is somewhat disappointing. With rates at historic lows and motivated sellers on the market in winter months, I would figure that a smart buyer would be out looking for a deal. That clearly wasn’t the case. I’ve given up trying to figure out home buyers in this market.

Moving forward, I’d like to take one zone randomly and demonstrate on a somewhat local level, how inventory (supply) far exceeds demand (buyers). In zone 21, which makes up a number of towns along the south shore of Long Island, there were 3,156 homes for sale. Only 134 of those homes sold. Less than 5% of the homes available are selling. That means less than 1 in 10 homes are selling in that zone, and that’s about the same for all the rest of Long Island.

Long Island Home Prices February 2010

Now let’s compare February 2010 with Last year’s numbers in the same month.

Long Island Home Prices February 2009

What we see is a stark decline in sales. But overall, the homes available are down nearly 10 percent. That’s the good part.

When we look at the numbers from December, 2009 though, we see the phenomenon I mentioned earlier, the cycle of homeowners waiting to put their homes back on the market. It’s a cycle we’re going to see throughout 2010 and into 2011. The same homeowners not selling in one time period, wait to put their home back on the market later down the road.

To prove this point, in December of 2009, there were 28,479 homes for sale. And in February of 2010, you can see there were 29,175 for sale. The problem here is obvious, demand has declined and inventory has increased. When that happens to any product, from sneakers to cheeseburgers to cars and to houses, economics 101 teaches us that prices of that product must go down in order to sell.

Now the fluctuations in real estate can come extremely quickly. For instance, I’m going to say that by the end of April of this year, we’re going to see a great increase in buyer demand. Which would indicate a “stabilizing of prices”. Why do I put that in quotes? Because it’s a stabilizing of prices for homes that are priced right.

The same people who have their homes priced ridiculously out of the market are a nonentity. Buyers are not going to buy those homes. The “stabilizing” of prices will be in that 5% to 15% of homes that are priced correctly and the competition between buyers for these select homes will be incredible.

I will leave you with this bit of insight. I recently had a home hit the market for $580,000. I had an open house recently during the first week it was on the market. There were over 100 people at the open house. The home sold in less than 7 days. I received over 10 offers and the home sold for more than asking price.

There are buyers for every price range. They’re just waiting for you to list with the right agent who can consult you on accurate pricing and market the home effectively to sell. Hint…his number is 631-831-9048.