Real Estate Blog
Thursday, January 29 2009
Lately, when people ask me about current market trends, there are three issues that seem to come up over and over. The following discussion of these issues should help
residents of the Three Village area understand what is happening in our local real estate
One of the most vexing questions for my clients and customers seems to be “Why are home prices dropping so much?” Understanding the answer to this query requires a bit of historical perspective. Before the real estate market boomed off the charts from about 2000 to 2006, price appreciation was fairly standard year over year. As noted in Brookings
Papers, an often-quoted publication, the appreciation in home values in 5-year increments averaged about 26.5 % from 1980 to 2000. Then, in only 6 years, it jumped by 89%. (See Exhibit 1.) This was simply not sustainable, healthy growth. So as odd as it may sound, in a way, the market is not actually in decline. It is getting to where it should be. This is a positive step toward recovery of the market.
Many people also seem confused about how to tell when prices will go up in the future and when they will go down in the future — in other words, the direction of the local market. Here the key element is inventory. A steady market, which is neither a buyer’s
market nor a seller’s market, is generally considered to have 5-6 months’ worth of unsold homes on the market. A buyer’s market, which is where most markets are now, is
generally viewed to have an eight-month inventory. In such a market, there is an
overabundance of houses, meaning that supply exceeds demand. That is when prices drop. (See Exhibit 2.) In the Three Village area, we have a 10- to 12-month supply of homes, which means we still have a backlog. We cannot yet expect prices to go up.
Lately, the third most popular question is whether homeownership is still a good way to build wealth. Understandably, some people have lost a bit of faith in the real estate market. But that is because they are looking at only a narrow slice of the overall picture. In other words, remember that real estate is cyclical. There are booms and busts, and this is not the first or last time that home prices will be down. However, as shown in Exhibit 3, a study by The PMI Group, Inc., reveals that over a 15-year period, the value of homeownership
increases by 110%! And the return on equity, which is determined by how much of a down payment a buyer places on a home, is almost 500%! This study should leave little room for doubt: Real estate is still a wonderful avenue toward building personal wealth.
If you have any questions, contact me. I am happy to share my expertise. And meanwhile, to keep current, visit my website: www.Ardolino.com.
Tuesday, January 20 2009
A Special Report By Michael Ardolino, Associate Broker,
Nationally, the recession that started in December 2007 still has its grip over the economy. The housing market in much of the country is weak, with steep home price decreases, declining home sales figures, and high foreclosure rates. Regionally, home prices on Long Island have fallen by 10.6% over the last year, according to the latest figures from the Multiple Listing Service.
For buyers, the current market is a rare opportunity. Prices are down, there is plenty of inventory, and mortgage rates are historically low. In fact, rates may go even lower, due to the latest action planned by the Federal Reserve. Currently, the 30-year rate is at 4.96%, a 37-year low. It has gone down 1.5% since October. (See Exhibit 1)
Another positive factor is that homes are more affordable than they have been in many years, meaning that a lower percentage of household income is needed for housing expenses. This, along with the low rates, is likely to get buyers off the fence. In fact, as a December 6 article in The New York Times stated, "Everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage." The first-time homebuyer is in a particularly good position, with no home to sell before buying.
Of course, the more buyers, the lower the inventory of unsold homes. There is about a 14.5-month supply of unsold homes in the Three Village area, which means we still have a backlog. (See Exhibit 2)As The Wall Street Journal reported on December 2, economists believe that prices will go down even further before finally trending back up. This is in part because another wave of foreclosures is expected when millions of option adjustable rate mortgages reset to a higher rate. (See Exhibit 3 for a link to a 60 Minutes Report on this topic.) So the reality is that a seller who continues to "wait it out" may have a long wait.
The smart seller will understand this, and will price the home accordingly. In my expert opinion, listing prices, not just selling prices, need to go down. This is a necessary step toward recovery of the market. It is a move toward a more stable and healthy market. Treasury Secretary Henry Paulson stressed this on December 17, when he noted, "I have said from day one that the key thing to get us through this period is getting housing prices down." In a way, the market is not actually in decline; it is getting to where it should be. Speculative buying, fueled by double-digit home apprecia-tion figures and risky interest-only mortgages, was simply not healthy. (See Exhibit 4)
The bottom line is that both buyers and sellers owe it to themselves to obtain expert advice before entering into any transaction in this challenging market. If you are ready to buy or sell, contact me. I have a proven track record and decades of experience. I have also had the honor of being nationally recognized as an expert in my field.
60 Minutes Report - Click Here to Watch the Video
If you have any questions, call me at 631-941-4300 or email: Michael@Ardolino.com. I am committed to keeping you abreast of market conditions, and I’ll continue to provide updated, pertinent information. For additional data, visit my website at www.Ardolino.com, where you’ll also find my new blog. Please take a look, and let me know what you think! All Rights Reserved.
Thursday, January 15 2009
Our Three Village Students did it again...
The Ward Melville High School Science Intel students were ranked 3rd in the nation as semifinalists. Eleven students received $1,000.00 each for their projects. Last year they were ranged #1 in the nation. Ward Melville High School students consistently do well we should all be very proud of them.
Thursday, January 15 2009
Thursday, January 08 2009
As seen in The Village Times Herald on January 8, 2009
It's here. The greatest opportunity for shoppers in the Three Villages in years. Here's how it works:
Wednesday, January 07 2009
I have been paying close attention to the proposed Port Jefferson Village Moratorium and received this most recent update that I wanted to share with you:
Port Jefferson has proposed village wide moratorium. This effects both residential and commercial properties. If approved, it will suspend the right of property owners to obtain building department approvals (i.e. building permits) for a period of one year from its enactment.
As it is currently worded, ."for any use other than one single or two family residential use where currently authorized by law." Worded this way would restrict permits for pools, fences, garages, retaining walls, decks, etc. As these are structures outside the footprint of an existing structure.
As stated by the Suffolk County Planning Commission, "A moratorium is from one perspective the most extreme land use action that a municipality can take because it suspends completely the rights of owners to use their property".
We are facing the worst financial crisis our country has seen in decades. Locally, the real estate market is struggling to recover right now as we face questionable levels of unemployment.
Visit www.pjvresidents.com for more information and alert your friends and family. If a resident, please sign the petition available on the website. If you are not a resident, feel free to contact me for a non-resident petition.
**The village meeting has been postponed until the beginning of February and has been moved to the Port Jeff HS Auditorium as the attendance levels at the Jan 5th meeting well exceeded the Village Hall capacity.