Why Long Island House Values Must Plummet (Milton, Nassau: high crime, to buy)

[modmondays]

Originally Posted by zulu400

Guys... someone please explain this to me...

Jump in Home Construction Raises Hopes - WSJ.com

This article sites that there is approx 14 months of inventory... I guess for the entire country.... anyway, why would builders start building new houses now ? Is 14 months the average lag time for the home builders.... looks like the construction may be happening in certain pockets but this article is not clear on that (what do you expect ?).... know of any new constructions going on in Suffolk ?

Also on a side note what exactly constitutes a housing start ? I mean is it when someone submits a plan for a house/condo "to be built" or is it when the house/condo is completely finished ?

This made no sense to me either! LOL

Especially, when the home builders have been mentioning for the past 6 months the problems they are having.........

I really didnt understand it when I heard it on the news.....

[modmondays]

Originally Posted by Jrprofess

Alrighty Mr. Academic ....I stopped out of a doctoral program so I can climb up into my ivory tower and get all fancy "statistical" on you if you prefer

You do realize that your assertations, although they have an analytical feel are pretty subjective as well. As for analytics, there is no "new economy/credit" in my opinion, just a return to the sane standards of credit pre-1999/2000. I was raked over the coals in 1999 for my mortgage and debt ratio, and that prudence has returned. It is not new. Regarding excess housing inventory being an issue for a market free fall, I simply think you will see many of these homes simply get pulled off the market, as I mentioned before. Ergo pulling back on inventory. Long Island does not have tracts of "drive until you qualify" gated communities that were slapped up in states like Nevada, Arizona and Florida, many who were simply speculators. I think that is why it avoids a full scale free fall. I do not think it is out of line to think that a 3 br Ranch, full basement, 2 bathroom on .25 acre in Hauppauge for example, maybe listing for 400k now, corrects another 10% as I mentioned to 360, and then stagnates as a price point for 5 years. In that time historical norms for the region may catch up (3.5-5% increases year over year historically). That is just one man's humble opinion...

But Rent-to-Own ratio's here are still too high and another 10% drop is not going to matter much.....

Lets see about inventory come the next few months. It was at its all-time high here on LI last year, and that was a pretty bad selling season as well.

Dont forget Wall Street -- HOPEFULLY, it will not ever be back to the way it was for the past 20 years. The money all of those people made was fuel on to the local housing bubble - - especially right after 9/11. People then got "priced-out" of Manhattan leading to crazy price increases in the outer boroughs and LIRR/Metro North/Path suburbs.....

Easy Credit + Wall St. + 9/11 = Bidding War Frenzy....

All three of these "multipliers" are now gone - - hopefully?

Yesterday, the NY Times ran an article that showed that LI traffic numbers via car and LIRR ridership was significantly down the past year. They posted a photo of the inside of a LIRR car going from Manhasset to NYC (I would "assume" it was during morning rush hour" since there were suits- - it was hardly crowded - even open seats). Manhasset is "Ground Zero" Long Island for the Wall Street crowd due to fast commutes. If Wall Street doesnt come back, a major part of the housing fuel for this area will be gone. I dont know what will replace it.........

[Elke Mariotti]

Originally Posted by modmondays

Yesterday, the NY Times ran an article that showed that LI traffic numbers via car and LIRR ridership was significantly down the past year. They posted a photo of the inside of a LIRR car going from Manhasset to NYC (I would "assume" it was during morning rush hour" since there were suits- - it was hardly crowded - even open seats). Manhasset is "Ground Zero" Long Island for the Wall Street crowd due to fast commutes. If Wall Street doesnt come back, a major part of the housing fuel for this area will be gone. I dont know what will replace it.........

I saw that article in Newsday - did they have the same coverage in The NY Times?

[Elke Mariotti]

Originally Posted by mathjak107

those seminars remind me of when i was first starting out as an investor and we had the wave of no money down seminars... you remember the likes of carlton sheets and those other loosers...

that was a plan that worked great- until it didnt then it caved in like a house of cards.... everyone of those high profile authors and seminar givers went bankrupt at some point from following their own goofy advice

I remember them well!!

[Chrisk327]

not sure what 9/11 has to do with this.

wall street is a big part of the huge apartment prices in NYC and houses in the hamptons. However, I don't think we have many investment bankers living in the vast majority of LI areas. Yes there is money for everyone else as in it kept people employed, but the big salaries I don't think were affecting the "normal" areas.

In my neck of the woods the big multiplier was the easy credit.

I'm with JrProfessor on this one, we've seen a decline, but in the nicer areas, there still might be a bit to go, but we're not falling off a cliff.

[MikeyKid]

Originally Posted by Elke Mariotti

Not sure I understand your question/request about "refining these counts"??

I know there are dups in my counts and not sure they include foreclosures... I was hoping a Realtor could give actual counts of the inventory.

I personally have a few (first time) buyers right now. Yes, they're looking in the lower groups, but they're serious. Long Island is a market unlike any other, for different reasons to different people, and IMHO will always attract buyers, even if the number has gone down at this time.

The big difference I see is that buyers are more prudent when it comes to affordability - hooray!

I'm not certain what your point here is - I don't think anyone would argue that homes are being sold and that there are "serious" buyers. As for affordability, the buyers have no choice... they won't get the financing.

My point on first time home buyers is related to the huge down payments needed since they don't have a home to sell. I would think they're looking well below the 400-500+ range of where my searches ended. These are the folks who have to be the most cautious... If you're rolling from 1 house to another, it's largely moot if values go down since your sale would have likely gone down in a somewhat comparable way... the profit you make on the sale is funny money towards your next buy. The first time home buyer is spending pure cash, which is not funny money at all. A drop in home value has a very direct impact in real dollars. That 80k they may have saved as 20% down on a 400k house has to be a scary proposition in this market.

Originally Posted by Jrprofess

I do not think it is out of line to think that a 3 br Ranch, full basement, 2 bathroom on .25 acre in Hauppauge for example, maybe listing for 400k now, corrects another 10% as I mentioned to 360, and then stagnates as a price point for 5 years. In that time historical norms for the region may catch up (3.5-5% increases year over year historically). That is just one man's humble opinion...

I'd somewhat agree with this assertion, but throw a caveat as to condition of the home. Many sellers are still pricing based purely on the stats (Beds, Baths, and Lot Size). The 360k should not be for the 40 year old run down house... it should be for the move in condition home.

[Mantaray14]

My wife and I will be homeless in month after out apartment sale. We are looking 2 choices right now:

1) We put a final offer on a 3 bedroom ranch with an oversized yard at 410k (asking 450k). We were told the owners (4 siblings), are deciding whether to take it or not. I'm sure they wanted at least 425k so they could get 100k each and pay the broker the rest. Even if they accept, it will cost us over to 2,800 a month with utilities and taxes (10.5k!), after our 150k downpayment. The house needs a new kitchen, the floors have to be redone (30yr old green carpet there now) and needs paint inside and out. Easily 50k in work to update the house. We planned on doing it over the long haul I guess, but wouldn't have much savings left over after the downpayment. It's in a nice quiet neighborhood though in somewhat well regarded school district.

Or

2) We have just seen upscale 2B Oceanfront Townhouses asking 2k a month to rent including all utilities,garage - we just pay electric. Some even have pools, gyms and other amenities! They are in mint condition. We have a 2 year old and spending another year on the beach with him would be great IMO. They are available immediatly and owners are desperate to rent. The rental market is a great deal right now!

I'm really steering twords option #2. Our time is running out and still feel option #1 puts our financial position at risk in this environment. We don't want to be house poor, while the house still needs updating. We also don't want to buy a cheaper house on a main road or in a bad school district. I don't think LI prices will plummet, but I just think it's too early for buyers still, unless you've inherited a bunch of money. Going to look at the rentals tonight and I guess we'll decide!

[dman72]

Originally Posted by Mantaray14

My wife and I will be homeless in month after out apartment sale. We are looking 2 choices right now:

1) We put a final offer on a 3 bedroom ranch with an oversized yard at 410k (asking 450k). We were told the owners (4 siblings), are deciding whether to take it or not. I'm sure they wanted at least 425k so they could get 100k each and pay the broker the rest. Even if they accept, it will cost us over to 2,800 a month with utilities and taxes (10.5k!), after our 150k downpayment. The house needs a new kitchen, the floors have to be redone (30yr old green carpet there now) and needs paint inside and out. Easily 50k in work to update the house. We planned on doing it over the long haul I guess, but wouldn't have much savings left over after the downpayment. It's in a nice quiet neighborhood though in somewhat well regarded school district.

Or

2) We have just seen upscale 2B Oceanfront Townhouses asking 2k a month to rent including all utilities,garage - we just pay electric. Some even have pools, gyms and other amenities! They are in mint condition. We have a 2 year old and spending another year on the beach with him would be great IMO. They are available immediatly and owners are desperate to rent. The rental market is a great deal right now!

I'm really steering twords option #2. Our time is running out and still feel option #1 puts our financial position at risk in this environment. We don't want to be house poor, while the house still needs updating. We also don't want to buy a cheaper house on a main road or in a bad school district. I don't think LI prices will plummet, but I just think it's too early for buyers still, unless you've inherited a bunch of money. Going to look at the rentals tonight and I guess we'll decide!

The worst thing that can happen with #2 is you pay rent for a few months more. The market is not going up any time soon so it's not like waiting will make you lose out on some great deal.

The worst thing that can happen with option 1 is that the market continues to go down, and goes way down, and stays there. Now, you have the house, but if someone loses a job or something..you'll be stuck.

[zulu400]

Originally Posted by Mantaray14

My wife and I will be homeless in month after out apartment sale. We are looking 2 choices right now:

1) We put a final offer on a 3 bedroom ranch with an oversized yard at 410k (asking 450k). We were told the owners (4 siblings), are deciding whether to take it or not. I'm sure they wanted at least 425k so they could get 100k each and pay the broker the rest. Even if they accept, it will cost us over to 2,800 a month with utilities and taxes (10.5k!), after our 150k downpayment. The house needs a new kitchen, the floors have to be redone (30yr old green carpet there now) and needs paint inside and out. Easily 50k in work to update the house. We planned on doing it over the long haul I guess, but wouldn't have much savings left over after the downpayment. It's in a nice quiet neighborhood though in somewhat well regarded school district.

Or

2) We have just seen upscale 2B Oceanfront Townhouses asking 2k a month to rent including all utilities,garage - we just pay electric. Some even have pools, gyms and other amenities! They are in mint condition. We have a 2 year old and spending another year on the beach with him would be great IMO. They are available immediatly and owners are desperate to rent. The rental market is a great deal right now!

I'm really steering towards option #2. Our time is running out and still feel option #1 puts our financial position at risk in this environment. We don't want to be house poor, while the house still needs updating. We also don't want to buy a cheaper house on a main road or in a bad school district. I don't think LI prices will plummet, but I just think it's too early for buyers still, unless you've inherited a bunch of money. Going to look at the rentals tonight and I guess we'll decide!

I'm rather inclined towards #1 .... if (and its a big if) you think thats the house you want to move into.... don't just buy it because the market is down OR because you have no place to go in a month..... thats a desperate buy.... one year down the line, if you hate the house then you can't imagine how bad you will feel ! If you are not sure.... then option #2 to rent looks more promising.... check if they can give you a short lease of 6 months.... maybe you have to pay like $50 extra each month, but thats a small price to pay. Meanwhile it will buy you time to look for the right house.... with a kid, a good school district and a good neighborhood makes a big difference.

Having said that.... I'm impressed... you have a good sized downpayment..... I am no financial advisor... but I would ask you to explore another option.... not to put the entire 150k on the house, but just the 20% thats necessary.... you can actually use the rest to weather the storm (in case someone loses a job etc...) make sure you keep that as a relatively liquid asset by putting it in incremental 6 month CD's every month or so ... so that when you need the money you will have something coming in every month.....

I know you are thinking ... hey the prices are going to come down in the near future (I am in agreement with you....) but if you think you have found the right house... go for it as you may not find it later on...... how long have you been looking for a house and in what neighborhoods ?

[I_Love_LI_but]

Originally Posted by Mantaray14

My wife and I will be homeless in month after out apartment sale. We are looking 2 choices right now:

1) We put a final offer on a 3 bedroom ranch with an oversized yard at 410k (asking 450k). We were told the owners (4 siblings), are deciding whether to take it or not. I'm sure they wanted at least 425k so they could get 100k each and pay the broker the rest. Even if they accept, it will cost us over to 2,800 a month with utilities and taxes (10.5k!), after our 150k downpayment. The house needs a new kitchen, the floors have to be redone (30yr old green carpet there now) and needs paint inside and out. Easily 50k in work to update the house. We planned on doing it over the long haul I guess, but wouldn't have much savings left over after the downpayment. It's in a nice quiet neighborhood though in somewhat well regarded school district.

Or

2) We have just seen upscale 2B Oceanfront Townhouses asking 2k a month to rent including all utilities,garage - we just pay electric. Some even have pools, gyms and other amenities! They are in mint condition. We have a 2 year old and spending another year on the beach with him would be great IMO. They are available immediatly and owners are desperate to rent. The rental market is a great deal right now!

I'm really steering twords option #2. Our time is running out and still feel option #1 puts our financial position at risk in this environment. We don't want to be house poor, while the house still needs updating. We also don't want to buy a cheaper house on a main road or in a bad school district. I don't think LI prices will plummet, but I just think it's too early for buyers still, unless you've inherited a bunch of money. Going to look at the rentals tonight and I guess we'll decide!

Option #2 for now. Perhaps you can work out a month-to-month tenancy instead of a year's lease. The market is still correcting. Keep looking; particularly see what happens after this year's spring selling season is over. As you can see, the sellers of Option #1 seem particularly unrealistic for the condition of the home (unless it is in one of the very, very top school districts). You did not mention if it has more than 1 bath. That counts too. I think you can do better than Option #1.