Long Island Real Estate Home Prices Forecast
The Long Island Real Estate Market is going to be going through some changes over the next few months, but like all other market predictions, that’s all they are, predictions. I have always been looking at the supply and demand to determine Long Island home prices because the truth lies within those numbers. Sales vs. available homes is what drives our price.
However, in this article, I’m going to includes several other points of interest that will include information on mortgage rates, foreclosures and “the real estate bubble”.
To bring all the information together, I’m including a video where I review some of this information with you. Specifically, I’d like to start with the “real estate bubble”. You’ve definitely heard the saying, “What goes up, must come down.” This video is going to focus on the bubble vs. the norm and it’s powerful information.
The Real Estate Bubble
So after watching this video, you might be wondering what exactly is going to drag prices down.
Supply Vs. Demand
This chart continues to bother me because it doesn’t seem to change very much.
There are slight differences, but overall, things are still basically the same when it comes to supply and demand. So the main drag on Long Island home prices is inventory. There is simply too much supply and not enough demand.
So someone could determine that this is going to change in 2012 or during this Spring. I do believe the demand is definitely going to increase over the Spring months due to low prices and mortgage rates.
This brings me to mortgage rates. Where will they be five months from now? What’s interesting to look at is the effect the stimulus package had on the mortgage rates.
There’s no doubt that mortgage rates were impacted positively by stimulus packages and home buyer credits. Now if you’ve paid attention to quantitative easing by the Fed, you’ll know that the purchasing of Treasuries by the Fed will end in June, 2011. This is a main component of low mortgage rates.
If there are no viable buyers for Treasury notes after the Federal Reserve stops purchasing these notes, this could very possibly send mortgage rates higher, literally overnight.
Now as mortgage rates go up, this will impact how much buyers can afford to borrow.
For home sellers, this information is vital to keeping your “eye on the ball”. If your intention is to sell your home for the most money you can in 2011, there is no doubt in my opinion, that listing your home now is better than waiting.
Are foreclosures going to be a problem for the Long Island real estate market in 2011? The answer is yes. How will foreclosures impact prices? The same way they have over the last two years. Increases in short sales and bank foreclosures to the market continue to drag down prices because they sell for a lot less than your average “normal sale”. When a foreclosure or short sale closes, that sale number becomes part of what appraisers look at when they determine the value of a home.
If there’s one thing the graph above demonstrates, it’s that we have a long way towards getting through the foreclosure mess. Notice the inventory building up to 2008 as it rises, we are now on the way down and if it took 4 years to get to the top, I’d say it’s going to take nearly the same amount of time to work out of it. That’s puts us at 2014 to be basically through the foreclosure mess.
The Bottom Line
The pricing forecast for the Long Island Real Estate market is much like the rest of the country. Our greatest challenge is getting homes sold vs. homes that are for sale. Supply is still very high and demand, while improving, is still very low. One could look at the supply vs. demand challenge and adjust it for the season (we had a rough winter that may have hindered sales), but with mortgage rates still at historic lows and prices down nearly 40%, I don’t care what snow storms hit our area in February, home buyers should have been out in full force – buying!
The fact that sales were much lower than current supply, only makes me wonder what buyers are thinking. I know I’ve spoken with numerous buyers and many have told me they’re waiting to save more money or for prices to drop or for the moon, stars and sun to be in perfect alignment. Whatever the reasons may be, buyers are still cautious and that means, if you’re in the market to sell, you’d better be talking with a professional and deciphering this important information.
If you’re having difficulty paying the mortgage or are so “upside down” on your home value (the home is worth much less than what you owe) and you’re concerned about continuing to pay a mortgage (and dump your money into a declining investment), then contact me. Do not “wait it out”. Maybe waiting is right for you, but the only way to determine that is to talk with an expert. Hopefully, I can provide you with info that helps you make your best decision possible. I can be reached at (631)881-5959.