Long Island

I google-searched, “is the housing market going to crash” and I was left with a lot of information-overload.

However, this piece of information from Lawrence Yun, posted on his LinkedIn, shared some great insight into the comparisons of the current housing market and the last actual housing crash.

I think so many homebuyers are waiting for “the market to go down”. I hear it when I speak with folks and I cringe, literally.

Let’s look at a few things.

In 2008-2009, home prices went down 30%. The foundation of that market was built on weak “pilings” of absolute crappy mortgages and a very shaky national employment rate.

If you haven’t seen the movie, The Big Short, I highly recommend.

During that period and run-up to 2008, prices had previously skyrocketed from 2003 to 2007 with repeated year-over-year home price increases of as much as 20+%.

During that time, subprime mortgage (mortgages that allowed folks with poor credit, low (or no) down payment and low income/assets) were very common.

Millions of people got mortgage loans that ultimately, should not have gotten them.

Mr. Yun’s article on LinkedIn, does a great comparison of these different markets.

Housing inventory, which is the number of homes/condos for sale, was astronomically high and rose quickly throughout 2008-2012.

We are in the exact opposite situation, where inventory levels still remain low here on Long Island.

Mortgage delinquencies remain much lower than in 2008. So people aren’t losing their homes to foreclosure nearly as much as they were back then.

We do not have the same pressures on the housing market, that we do now.

However, the pressure on the market today is different, coming from the Federal Reserve, raising rates. This may have a very adverse effect on new houses/condos coming to the market in the future – check out my Youtube video on this (especially if you’re “waiting for the market to go down.”)

Now if you’re not following me on Youtube or Instagram, please subcribe/follow as I’m doing a ton of updates every week on both of these platforms.

To get the latest update on the housing market and strategies for buying the new market, listen to the Housing Expert’s Podcast on Apple or Spotify.

Call or text if you want to buy or sell a house (631)831-9048.

This article may be the most important I’ve ever written in my non-professional writing career. I’m a real estate agent. I’m not an economist or financial advisor/guru by any means. Nor am I a professional writer. I help folks buy, sell and invest in real property.

However, I am an experienced real estate agent who’s been selling homes since 2007. I missed “the boom” in 2004-2006, when real estate agents were writing sales agreements on the hoods of their cars in front of the home they just showed and did it as they watched other agents doing the same thing as prices rocketed up 20%+ year after year!

Fast-forward to 2020 to June 2022. We just witnessed an extreme sellers market whereby I personally sold many homes with 20 or more offers and sold them 10 to 15% higher than asking price.

During this timeframe, all of the homebuyers I personally worked with, I went over the details of the market and provided them information, bluntly telling them that the market was high and that they should know that they were overpaying.

My podcast is dedicated to transparency and I pride myself on being honest and as helpful to my folks as I possibly can.

So in fact, I consider myself a real estate agent and blogger/advisor. I look over and find the information to help folks like you understand what is happening in our local real estate market and I do that so – when it comes time for you buy or sell or refer someone you know, you think of me.

Having said all this, here’s what I believe will happen to housing prices and I’ll share my insights and opinions as to how you should proceed.

I’ll break it down for:

• Homeowners thinking (really wanting) to sell within the next year
• Homebuyers who are on the fence
• Homeowners who want to sell now and need to buy
• Investors

What’s Going To Happen To House Prices

As of today, I have about 12 articles I could share with you as of this date (October 5, 2022). I’m not much of a believer in day-to-day/minute-to-minute “news” cycles.

We are all just living our lives and for regular homeowners (or prospective homeowners), we really want a house to live in and reap the long-term benefits of the comfort in a place we call “home”.

The financial benefits are certainly something we consider, but we only really think about those things intensely, when it’s time to move.

With that said, here’s an article from Realtor.com that I think is extremely interesting, because it’s from a source that promotes the sale of real estate. I’m a Realtor. The information isn’t pretty, especially if you’re selling within the next year (not now) or buying now.

Home Prices Expected To Fall By A Lot – Even If There Is No Recession

Any homeowners thinking (really wanting) to sell within the next year, you have to understand that mortgage rates rising from 3% to 6.7% in 6 months is unprecedented.

The Federal Reserve is attempting to curb years of a printing press (money printing) and financial manipulation (purchasing of mortgage securities to support monetary flow) in a timeframe that is unrealistic and damaging to the housing market.

I’m not a financial guru, but this is so obvious that it doesn’t take a Harvard graduate to understand.

Having said that, I want to point out a few – very good articles and podcasts that I’ve done that covered a few key aspects of Long Island housing prices.

Experts Are Getting Home Pricing Wrong – March 2022

What Happens When You Sell Your Home

This podcast is great only because, it shows you the difference between how a home was selling back in May (yes May!) and how quickly things have changed, just a few months later.

I tell people the market changed like a light switch back on June 15th or so. Literally.

Long Island Housing Update – Sept 2022

Notes on this one are simple and very telling – housing prices are flat. The housing market that was is largely – completely gone.

Due to low home inventory (low number of houses for sale), it’s still a “seller’s market” according to the data points.

Look, I don’t expect you to read or listen to all this content. You probably don’t have the time. I would suggest finding the time if you can. It will make what I’m about to share…easier to swallow.

My Take On The Entire Housing Market

We are entering the unknown (twilight music theme…).

No one, especially financial guru’s, have any clue of where things are going. However, I’m willing to bet the following:

1. Home prices on Long Island will decline between 8% to 20%. This decline has already started (from the inflated pricing) and will continue through the next 12 months (it will take time but it is going to decline – yes that much).
2. Home price decline will be caused by higher interest rates, lack of homebuyer affordability, inflation, and recessions – all of which will slow the number of homes going into contract each month.
3. Inventory (number of homes listed for sale) will not increase dramatically but remain relatively low because many current homeowners have purchased or refinanced well below current rates so a “cocooning effect” may stifle new inventory.
4. Foreclosures will hit the market in increasing numbers (they’ve been at tremendous lows, well below normal averages for too long).
5. Rental prices will settle down (or may dip) as tenants begin to pull back on payments or eagerness to pay “through-the-roof” prices sets in.
6. Investment flips (both renovate/sell or wholesale strategies) will continue to thrive and in fact increase dramatically as the best investors move with the market, buying and pricing to sell (and if renovating, doing so at much lower costs). Only the best will survive here. The less experienced investor will lose (a lot).
7. Government intervention (also known as interference) is the unknown in all of this. No one knows what monetary or civil procedures the government will enforce to “save” the public.
8. A buyers market will emerge at some point. How long will it last? I’ll know more next year after the Spring 2023 market. Stay tuned. Remember, traditionally, it is considered a buyers market when we have more than 6 months of available inventory (the rate of sales vs homes listed for sale). I’ll be talking a lot about this in the upcoming housing market podcast updates.

The biggest claim I’m making here is Inventory. No doubt, people will still list their homes but I just have this feeling that we won’t see a repeat of 2008 to 2011, where you saw real estate for sale signs riddled throughout all of our streets which drove home prices to crash.

I just don’t see that happening because of the extended period of ridiculously low mortgage rates for so long. People may very well “hunker” in and stay where they’re at (and not list). This low inventory/lower demand housing market, may keep prices more steady (hence the 8% to 20% price drop range).

Note: Home prices will reset and drop 8% at a minimum over the next several quarters. So if you’re home is worth $650,000 (meaning it would sell at that price right now if I put it on the market), within 6 months or less, it will sell for under $600,000.

What Does This Mean To You

Homeowners thinking (really wanting) to sell within the next year

Call me immediately!

If you didn’t see that comment coming earlier go drink a glass of water (or whiskey).

We all have plans but sometimes you have to make a tough call so if you’re waiting to retire or for the school year to end, meeting with me to discuss your options will not hurt you.

I think if you’re in this category, knowing your options is paramount and possibly thinking outside the box may help you tremendously.

Homebuyers who are on the fence

If you’re currently renting, look at it this way: You can live in the rental property for the next….10 years. No one knows what will happen to mortgage rates. All we know now is, 3.5% mortgage rates are gone and may never return for another generation.

Whether you’re renting or living in your “parents basement” (or worse, you’re in-law’s), real estate is a long-term investment. I just had a client who sold last year, who bought in 2008 (the beginning of the Great Recession) and paid top-top dollar.

They walked away from the closing table in 2021 with 14 years of mortgage principle reduction (forced savings) and over $225,000 of equity appreciation in that time.

Think on that for a minute.

Additionally, if you’re in a position where you’re qualified (or capable of getting a mortgage approval) now, and you act, you’ll be able to get a 30 year fixed mortgage – which is a fixed payment on money borrowed, which is an incredible hedge against – inflation.

Prices of milk, gas, materials, and everything else goes up – including rent prices possibly – but your mortgage payment on principle and interest….doesn’t change.

Please listen to my podcasts. Stay up-to-date on mortgage rates.

Homeowners who want to sell now and need to buy

This is the most tricky of the pack here because you’re thinking “The house I buy is going to go down in value”. Of course, the one you currently own is going to go down in value also.

But most importantly, for this category, if you fit this description, think about this – the home you’d like to live in now (the one you’d like to buy) will most likely:

A. Be bought by someone else who will own it for years-to-come and recoup the investment and gain from the equity swing.

B. May never come back on the market.

C. If it’s an upgrade, while they’ll lose pricing power (like everyone else), they’ll also get it back and hold the line a little better.

Like any homebuyer, remember that your home purchase is a long-term investment. If you’re source of income is strong and you have every reason to believe it will remain that way, you’re fixed payment on your purchase will hedge you against inflation.

Years from now, you’ll be in a strong position as the market shifts and you gain equity and ride out the current storm in the home you wanted and took action on.

Looking back on the last 100 years of real estate appreciation helps too (yep, I googled it). What will the next 100 years look like, no one knows, but if history is a measure, things will be great!

Investors

You’ll need to work with an agent who understands comps. You will need to look for avenues to keep your renovation costs down (while not sacrificing on quality).

If you’re renovating and selling, make sure to continue focusing on wowing the buyers. As we enter more of an even market/buyer market, attention to detail will be super important.

Do not listen to the contractor who tells you, “the boiler works, so leave it”. Redo anything and everything that is crap or old – including the roof!

If you currently own a portfolio of rental properties, now may be a very good time to unload a few because rents are up, prices are up, and the old rule applies – buy low, sell high! Text me now (631)831-9048.

To Wrap Things Up

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I hope you got something out of this. Feel free to share with a friend and I look forward to speaking with you soon.

Feel free to subscribe to my Youtube Channel for future videos and shorts on real estate topics.

Again my cell is (631)831-9048.