Jan

19

Long Island Real Estate Market: Is It A Buyers Market?

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Throughout the Long Island real estate market, I continually run into the question, “Is it a buyers market?” Let’s take a look at some information which will enable us to gauge where the market is right now. Then you, as the reader, can come up with your own conclusion.
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The median household income shows us the percentage of household income used to pay a mortgage. Note that from 1982 to 2007, the average percentage of income spent on a mortgage was approximately 23%, according to Credit Suisse. Currently, due to a reduction in prices and a steady increase in overall income for the average household, less than 17% is used towards paying a mortgage. So less money is being used to pay the mortgage for the average household.

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When people talk about a “Return On Investment”, they look at the return of cash or equity back in their pocket, after having invested a certain amount. For this chart, assume a $100,000 investment. If, on January 1, 2000, you invested $100,000 in the Dow, you would have lost 19.8% or $19,800 as of December 31, 2008.
Look at the Nasdaq! If you invested that $100,000 in the Nasdaq, your portfolio would have lost 59.9%…or $59,900. Ouch!
Now, if you took that money and purchased a home, even after the last 2 years of a down market, you would have an actual profit of 90.1% or $90,100, here on Long Island. And with real estate, please keep in mind that you wouldn’t need to invest the total $100,000 to purchase a $100,000 home. You would use a mortgage to leverage your purchase, keeping money in your pocket - so, assuming you used 10% of that money ($10,000) to purchase a $100,000 home in January of 2000, your return on investment would be 900% (the beauty of buying real estate).
And now if we talk about interest rates being at an all-time low, right now, the savings alone on a good, low interest rate is very advantageous.
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A $250,000 loan has a payment of $1,663.26 per month for 360 months. The total interest for this loan is $348,769.07.

A $250,000 loan has a payment of $1,580.17 per month for 360 months. The total interest for this loan is $318,861.58.

A $250,000 loan has a payment of $1,498.88 per month for 360 months. The total interest for this loan is $289,593.34.

A $250,000 loan has a payment of $1,342.05 per month for 360 months. The total interest for this loan is $233,141.28.

Interest rates currently are at an all-time low.

Finally, I will leave you with a quote from the famous financial adviser on CNBC, Suzie Orman, and what she said on Oprah recently.
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If you have any further questions about the market, please feel free to leave a comment or call me at 1-877-765-3123, Ext. 51.

(c) Copyright, 2009 www.tommcgiveron.com
By Thomas McGiveron, Licensed Salesperson



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2 Comments so far

  1. Long Island Real Estate Market | Tom McGiveron | Coldwell Banker Realtors on January 28, 2009 6:25 pm

    […] question is, what happens if the rates don’t go back down? Now I’ve gone over the whole “it costs a lot more for a mortgage at 7% than it does at 5%” thing and I’m not doing it here […]

  2. Long Island Real Estate Market | Tom McGiveron | Coldwell Banker Realtors on February 27, 2009 4:01 pm

    […] I believe that now is such a fantastic time to buy, my main concern for this article is to show sellers that they really should consider calling me […]