Real Estate Blog
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.