Long Island Real Estate Market: Sell Now Or Hold On…For A Long Time

I have been writing articles about the Long Island real estate market for some time now and I came across the perfect information that illustrates what homeowners might expect during the next few years. I thought about the title to this article and decided to just lay it all out there.

What you’re about to read is not just my opinion. I’m not as self-absorbed or diluted as our typical politicians who seem to know it all when things are good and point the finger when they’re not. No, I don’t, and will not, publish articles about what I think or feel. Rather, I publish articles about information.

You may click the image(s) to enlarge it. The information is forwarded-looking in nature and deals with what’s down the road for real estate values. I find myself talking with many homeowners who ask me “my opinion” about what’s in store for the Long Island real estate market. As I explain to them the ramifications for “holding on” and not selling now, or asking a 2005 price for their home in 2008, I get alot of, “Well, you don’t know what’s going to happen in the future…” or “I think it’s going to come back next spring…”

Well Freddie Mac doesn’t think so according to Bloomberg News who quoted officials citing the S&P Case/Schiller Home Price Index. (I’m scratching my head)…So I guess the average homeowner who is a teacher or a plumber or a doctor knows more about the real estate market than Freddie Mac or Bloomberg News or Case and Schiller. See the next slide.

I took this quote directly from the previous slide: Radar Logic publishes price-per-square-foot data used as the basis for the Residential Property Index, or RPX market, used by most hedge funds and institutional investors to hedge their mortgage-related bets. The 2011 estimate is not the company’s own, but is based on a forward curve produced from futures trading in the RPX market.

This information is gathered and based on hard data. Data that people collect at Radar Logic that make up the RPX market, cited on Sqawk Box, Mad Money and other financial-related news programs. The data suggests that home values will continue a downward direction across the nation. So do you still think next spring will bring back the 20% equity loss during the past 3 years? Enter the last slide.

Before clicking on this last slide, I want to address my cynical tone in this particular article. I’ve found that being “Mr. Niceguy” with regard to my presentation of information really doesn’t hit home as well as being somewhat cynical and hard-nosed. “Mr. Niceguy” is boring and “Mr. Cynical-In-Your-Face” helps to nail down the point. However, keep in mind that I own a home, my sister owns a home along with my Mother, other family members and friends as well and I do not take any pleasure at all from watching home values drop.

But I digress. Click the next slide.

What this slide shows is probably the single most important piece of information. It shows five year increments of the market since 1980. Now real estate values tend to increase (appreciate) about 5% per year. And during the previous 20 years, home values have appreciated a total of about 106%. So if you bought a home in 1980 for $100,000, your home in 2000 would be worth about $256,000 (appreciation values compound: 100,000 + 25% = 125,000 + 27% = 158,750, etc.).

During those 5 year increments, you’ll notice, about a 5% or more average increase - per year. Now from 2000 to 2006, you’ll notice a tremendous 89% home appreciation figure. That’s a whopping 14.8% appreciation - per year. So in 6 years, the real estate market and definitely Long Island included, realized a surge which rivaled the previous 20 years. And on Long Island, the numbers are staggering when we discuss appreciation from 2002 through 2006.

What this last slide represents is the inflated values and what experts would refer to as a signficant economic anomaly (deviation from the norm). What we’re seeing now is a market correction which may very well overcorrect itself in the form of the following:

A. Buyers not being able to get mortgages

B. Buyers refusing to buy (or “hold out for the bottom”).

C. A combination of both.

In any event, I am writing this article to inform my readers, especially homeowners, that this real estate market is not something you treat lightly or “go with your gut” when it comes to making major financial decisions about the sale or holding of your property.

I am available anytime to my clients for further discussion (as they know I am only a phone call away). If you would like to become one of my clients and hire me to help market to sell your home, please call me at 631.831.9048. For a closer look at the Long Island real estate market or to schedule a one-on-one personal meeting with me, call today.

I welcome the opportunity to assist you in any way I can.

By Thomas McGiveron, Licensed Real Estate Salesperson

Oct

9

Long Island Real Estate Market: Sell Now Or Hold On…For A Long Time

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