Starter Houses on Long Island? (Brookhaven, Islip: section 8, cheap apartments, sex offenders)

[PhilG]

As the post-war era of the 50s went into full swing, the emergence of a true middle-class with disposable income formed in our country; especially in the NY suburbs. As the various social revolutions of the 60s and 70s convinced women that their self-worth is derived soley from a successful career, the emergence of the two income household as standard also emerged. I'm all for women working if they choose, but follow me on this: as it became more normal for households to have two incomes, often with fewer children, and commuting to NYC for the highest salaries, markets - especially the real estate market - adjusted to reflect what consumers could bear. Folks want to live near NYC and the beaches, so there is an inherent premium to real estate in Nassau County and western Suffolk. Therefore, as two-income households became the norm, prices rose. As interest rates dropped after the early 80s period of an extremely high prime rate, prices rose. In the period of the mid to late 90s and the turn of the century, rates were at all time lows. Coupled with the fact that most households are double income and so many people live on credit, home prices rose to levels that seem much too high, but were still legitimate considering people still bought them. Therefore, when rates begin to rise (now), our culture shifts to a more traditional family contruct (I believe it's happenning to an extent), and salaries adjust for the simple fact that employers cannot attract high quality employees with current salaries (assuming that more and more employees are sole-providers), home prices will also adust and decrease to more reasonable levels. When I say "reasonable" I mean a level that caters to the bulk of the LI middle class. Right now realtors and home-sellers are living off the high of the real estate boom and 4.5% interest rates. People are listing their homes for way more than the market will bear, and the house sits on the market for may months (or more than a year). Slowly we will see prices drop to reflect what household incomes of 80k (or whatever the LI middle-class average inome is)can afford. I forsee home prices for very average homes in Nassau County (in towns such as Farmingdale and N. Massapequa) to drop to 350k. Mind you that this is not a decrease in value - the inherent value is what it is. As Warren Buffet believed, a company, or in this case a home, has an inherent value. As Mr. Market fluctuates like a schizophrenic child, prices rise and fall. The five-year blip we just had was a result of a "perfect storm" of economic variables. The storm is over, and the seas are only beginning to calm. The only problem with my argument, in my opinion, is that the growing popularity for women to be stay-at-home moms is not really enough to affect the entire market. Also, some NYC salaries are such that it may be that the greatest market correction will occur in western Suffolk and onward.

[very private citizen]

Originally Posted by PhilG

As the post-war era of the 50s went into full swing, the emergence of a true middle-class with disposable income formed in our country; especially in the NY suburbs. As the various social revolutions of the 60s and 70s convinced women that their self-worth is derived soley from a successful career, the emergence of the two income household as standard also emerged. I'm all for women working if they choose, but follow me on this: as it became more normal for households to have two incomes, often with fewer children, and commuting to NYC for the highest salaries, markets - especially the real estate market - adjusted to reflect what consumers could bear. Folks want to live near NYC and the beaches, so there is an inherent premium to real estate in Nassau County and western Suffolk. Therefore, as two-income households became the norm, prices rose. As interest rates dropped after the early 80s period of an extremely high prime rate, prices rose. In the period of the mid to late 90s and the turn of the century, rates were at all time lows. Coupled with the fact that most households are double income and so many people live on credit, home prices rose to levels that seem much too high, but were still legitimate considering people still bought them. Therefore, when rates begin to rise (now), our culture shifts to a more traditional family contruct (I believe it's happenning to an extent), and salaries adjust for the simple fact that employers cannot attract high quality employees with current salaries (assuming that more and more employees are sole-providers), home prices will also adust and decrease to more reasonable levels. When I say "reasonable" I mean a level that caters to the bulk of the LI middle class. Right now realtors and home-sellers are living off the high of the real estate boom and 4.5% interest rates. People are listing their homes for way more than the market will bear, and the house sits on the market for may months (or more than a year). Slowly we will see prices drop to reflect what household incomes of 80k (or whatever the LI middle-class average inome is)can afford. I forsee home prices for very average homes in Nassau County (in towns such as Farmingdale and N. Massapequa) to drop to 350k. Mind you that this is not a decrease in value - the inherent value is what it is. As Warren Buffet believed, a company, or in this case a home, has an inherent value. As Mr. Market fluctuates like a schizophrenic child, prices rise and fall. The five-year blip we just had was a result of a "perfect storm" of economic variables. The storm is over, and the seas are only beginning to calm. The only problem with my argument, in my opinion, is that the growing popularity for women to be stay-at-home moms is not really enough to affect the entire market. Also, some NYC salaries are such that it may be that the greatest market correction will occur in western Suffolk and onward.

You are correct in stating that the marginal income of the purchasers and their propensity to spend this excess will determine the price of a given object.

Please consider these thoughts:

1) When the size of the workforce increased (women moving into the work force in mass) the money to pay them had to come from the current wage pool. A company is unlikely to upset its profit level, so it must arrest the offending cost. It will reduce cost (wages) and/or workforce size (jobs - less new hires or layoffs).

2) The value of the U.S dollar relative to other markets has declined. The dollar has less purchasing power and so you must give more dollars to obtain the same good. This explains at least some of the premium you are paying for a home. Investors expect their investment to return a certain value --- they want more dollars to obtain the same value when the value of a currency declines.

3) A disproportionate amount of wealth relative to population is retained on Long Island. This pool of available resources skews all measurements of disposable income, increasing prices in a corresponding fashion across all income sectors. Long Island is top heavy with wealthy individuals. This is a problem.

4) The ability to access cheaper labor markets permits employers to coerce lower wages from employees. (Currently - China, India, Etc. Eventually, the U.S will become the cheaper labor market.

Look at the rise and fall of the U.K. The U.K. was once the economic powerhouse in the world. Along comes the emerging market (U.S.). The emerging market steals the jobs. Investors move money toward increasing reward while workers see everything decline. U.K. becomes a second fiddle economy. Long island was hit with this first when companies fled to other states and now to other countries.

5) Most families purchasing a home are really buying a mortgage. They don't pay the cost of the house, they purchase a monthly payment that can be met via their marginal income plus their current cost of housing. As such, the cost of a home is a function of income and interest rates and the ability of the purchaser to meet the monthly payment. The asset has no other value until sold.

At the point of eventual sale the real value of the asset becomes a function of your ability to replace the asset. You may have obtained 100k in excess of your purchase price, but you may have to double your housing cost to obtain the replacement. Unless you can cash out by obtaining a replacement for a lower cost, you can never convert your "gain" into marginal income or wealth.

[Dedalus]

Originally Posted by PhilG

, the emergence of the two income household as standard also emerged. I'm all for women working if they choose, but follow me on this: as it became more normal for households to have two incomes, often with fewer children, and commuting to NYC for the highest salaries, markets - especially the real estate market - adjusted to reflect what consumers could bear. Folks want to live near NYC and the beaches, so there is an inherent premium to real estate in Nassau County and western Suffolk. Therefore, as two-income households became the norm, prices rose.

Like a variation on Ricardo's Iron Law of Wages - he says that wages will fall to subsistance levels cause there will always be someone willing to work for less...this says that the cost of "subistance" will always rise to the level of the money that people have, cause there will always be someone willing to pay.

[PhilG]

I have no idea. I have a degree in pre-colonial American literature and history. I wish I went to business school...

I'm just trying to figure out a way to liquidate my real estate assets and buy near the causeway in the village of Babylon and live on a teacher's salary (with my wife staying home with our new daughter). I'm keeping my eye on my local markets and downstate markets and am seeing prices fall in Nassau County and increase in the Capital District.

[GypsySoul22]

Babylon is really nice, Phil...! I wish I could afford to live there. It's the one town on LI both my husband and I love. The town has interesting shops, a great health food store, and a wonderful park. I actually lived there for 2 years when we first were married (renting). Good luck.

[ler0719]

Absolutely not true...maybe in Nassau. STARTER HOMES PEOPLE!!!! Sure if you look in Patchogue, Mastic, Shirley..there are definately homes there int he low $200's. It is true and the taxes are under $2500 in most of these homes. I have seen them myself when we were lookign and many of them are very nice indeed. They are not mansions but they are nice 2-3 bedroom homes with decent, very decent actually lot size. You have to look to find it. The MLS is a great place to find homes.

[PhilG]

That's true. I look at realtor.com daily for investments in my area (Albany), but often I scan the listings in eastern Nassau/western Suffolk Counties. Apparently Ridge is seeing some new construction at prices similar to Albany (and lower taxes, if you believe it). I also like Centereach/Stony Brook area, but those towns are 45 minutes away from the awesome culture of Nassau County's south shore. Yes - I said it's awesome!

Anyway, the only problem is finding a job that pays enough so that my wife can stay home and I'm not working 110 hours a week...

[windflower]

PhilG, you mention looking on realtor.com but IMHO if you are looking for homes on Long Island you would do better to check the MLSLI website (just put a www in front and a .com after, and you've got it). That is the best resource for listings on Long Island. Not all of the MLSLI listings end up on realtor.com, in fact I would say that many don't.

You may want to do what I did, and work with a realtor on Long Island as your buyer agent. That realtor can set you up to receive automatic emails whenever a new listing meeting your criteria in any of the towns you are interested in, enters the MLSLI system.

Oh by the way, Ridge (from what I have seen/learned) can be economically and demographically variable. It is not comparable to some of the other towns you've mentioned.

[KellyFG]

Originally Posted by windflower

PhilG, you mention looking on realtor.com but IMHO if you are looking for homes on Long Island you would do better to check the MLSLI website (just put a www in front and a .com after, and you've got it). That is the best resource for listings on Long Island. Not all of the MLSLI listings end up on realtor.com, in fact I would say that many don't.

You may want to do what I did, and work with a realtor on Long Island as your buyer agent. That realtor can set you up to receive automatic emails whenever a new listing meeting your criteria in any of the towns you are interested in, enters the MLSLI system.

Oh by the way, Ridge (from what I have seen/learned) can be economically and demographically variable. It is not comparable to some of the other towns you've mentioned.

Ridge resident here
The economics in Ridge are extremely close to those of Centereach, the demographic much the same as well. Biggest difference is the lack of strip malls & congested roads you'll find in Centereach.
Another interesting point that is contastly overlooked-the school districts in both towns are equal as far as stats go-with the exeption of a few of the Longwood elem's rating much higher than middle country.
Stony brook is a totally different place.

[PhilG]

Thanks for the advice...I'm very happy to hear others' experiences and ideas. I'm making offers on one or two more properties this week, and I hope that will get me that much closer to buying back home. It would be nice to spend in the 200s as "ler" mentioned, but I would like to stay near my family in Farmingdale/Bablyon/Lindenhurt/NYC. Average homes are going for around 450k-500k. The same would for 300 or so in my area, and tha taxes would be very similar. Long Island isn't cheap, but remember that the tax base is subsidized by a lot of commercial tax revenue. Upstate, my primary residence is worth $225k and my taxes are $4500. Also, when my band finally starts selling millions of albums, I'll need to be near Jones Beach Theater.

On a more serious note, I'll check our MLSLI right away!