Long Island Real Estate Market: The Proof Is In The Pudding

Filed Under Sellers |

I talk with a lot of homeowners about the Long Island real estate market and I continually hear many people say, “There’s no buyers…” While we could argue that a “buyer” is someone who’s actually ready, willing and able to purchase a home, let’s assume for a moment that a “buyer” is just someone who wants, very badly, to purchase a home.
I recently hosted an open house at a home in Babylon. The home is a ranch, priced very good for the area. I was expecting things to be busy due to the activity on the listing in its first week (4 agent showings each day - over 20 in 5 days). In anticipation, I had my front desk assistant make up extra copies of sign-in sheets and some other items. I normally bring about 25 business cards to my open houses. On this day, I brought a larger stack (about 50).
After the first hour and a half of the open house, I had run out of all my flyers and sign-in sheets, plus I had given out all my business cards. Loads of cars stopped by with many buyers eager to see the home.
Being in this business full-time, I see it every week, when a listing is priced correctly, it sells and sells fast. Of course when I try and tell homeowners this, they don’t really want to believe me. Afterall, I’m just a salesman.
There is a pent up buyer demand, especially now with the mortgage interest rates being so low. This is a fact, proven by my little open house with over 60 buyers.

Comments

2 Comments so far

Danielle G. on May 28, 2009 5:45 am
I have been a “potential” buyer for a few years now. I believe I represent many so called fence sitters and I can tell you what we are waiting for. It’s not the low interest rates (because I’m not buying an interest rate) it’s PRICE. 2.5 to 3x income was the historic norm for buying a house for many years before this bubble andd it will be again. What’s your neighborhoods median income? Now take a look at that same town’s median house price and then we can talk.
Thank you for your candid articles. They are refreshing and if you ever represent any houses in Seaford I would come to you first.
tmcgllc on May 28, 2009 2:33 pm
Danielle,
I understand you partly when you say, you’re “not buying an interest rate.” You’re buying a home to live in. But with that home comes an interest rate. The higher the rate, the more interest you pay on that loan. So PRICE and INTEREST RATE go hand in hand. On a $350,000 loan, the difference between 5% and 7% is about $500 more a month in interest payment. That’s $16.67 a day. A day.
With a low FIXED interest rate, the income affordability throughout the country is at its highest in the history of the index (dates back like 30 years or so).
Now of course, on Long Island - yes, you’re right - prices are higher….but so is the median income of Long Island - it’s about $30,000 more than the countries median.
But let’s talk brass tax - can someone making $65,000 a year with “normal” debt of say a car loan of $12,000 and a marginal credit card debt of say $1000 afford a $250,000 mortgage? Say with $600 month prop tax, 100 HOI, and 5% int rate - that’s about $2100 a month, just for the mortgage - at $65,000 at a 21% total tax bracket with a modest 401k contribution of 70 a month and 30 co pay on medical - they’re bringing home say - round down to $4000 - $2100 = $1900 a month left over.
Banking $150 a month for savings we’re down to $1750 - now
Spending money = $350 a month
Gas = $300
Home Electric = $130
Home Heating = $180 (that’s over 2k a year)
Food = $250
Cable/Phone/Internet = $150
Cell = $100
Misc = $350 (car and cc)
We are just about there - only $60 shy.

Is this tight - you bet. But increase that to the median income on Long Island and you’re in the surplus range - somewhat comfortably. And of course, this is ALL BEFORE tax write off and doesn’t take into account the pride of ownership and satisfaction of OWNING as opposed to renting (making someone else endlessly richer).

In this example - single person making $65,000 - it’s tight - but reasonably doable. Of course a $250,000 mortgage would mean this particular buyer would need MONEY DOWN - which in and of itself can be a challenge for many buyers. And in this example - they’re a little less than 2X’s income.

Each case is unique - a blanket statement of 2.5 to 3 X’s income is wholefully inaccurate, as some people will have ASSETS in liquid to offset their debt to income, and credit scores suggesting savvy ability to manage debts and income.

I empathize with you and your desire to make life AFFORDABLE! I couldn’t agree with you more - TAXATION at the property leve, state level and federal level is one issue I like to focus on because if people like you and even myself, were able to keep more of our money (when it’s all added up - figure about 45% of our income goes toward paying taxes - for everyone over the 15% bracket) maybe we all wouldn’t feel such a pinch…
I mean,let’s be honest - $9000 in taxes a year - ….that’s insane - $750 a month - lets talk about that a bit too and Long Island closing costs - the tax escrows right there are $6750 on average (9 months standard escrow) and then title insurance and fees - wham, right there the average buyer is up over $10k in closing costs.
Keep the faith. If you want to step up your home search, feel free to contact me. Thanks for your comment - keep coming back.