Analysis: LI home sales plummet, foreclosures rise
Long Island home sales have plummeted 56 percent in nearly eight years, and the number of foreclosures has more than doubled, a Newsday analysis has found.
The analysis shows the weakness of Long Island's real estate market -- key to the area's economic well-being -- even before Sandy walloped the Island. Mastic Beach, for example, which experienced heavy flooding, had twice as many foreclosures as home sales in the first 11 months of 2012.
Newsday's study encompassed thousands of records and eight years of housing data, including nearly every recorded home sale and lis pendens -- the first legal foreclosure filing -- through November 2012. By looking at a period from 2005 to 2012, Newsday examined the years of booming prices and easy lending, along with the time during and after the housing market collapse.
The analysis, based on data from Brightwaters-based LI Profiles, found that four years after Long Island's housing market crashed, real estate has yet to make a strong comeback. Some experts predict housing may never be the economic backbone here that it once was.
"We're completely tied in with our real estate," said Commack real estate attorney Lita Smith-Mines. "Should we have been? Probably not. But we are."
Economists, real estate brokers and housing counselors suggested that Sandy likely exacerbated the market's weaknesses, by hurting sales and lending while increasing the risk of foreclosure.
Among the findings:
1. Home sales fell from almost 49,000 in 2005 to 21,487 in the first 11 months of 2012, the latest data available. The dollars they generated in those periods dropped from $30.3 billion to $12.9 billion. Sales volume declined every year except for a brief uptick in 2010, when temporary tax credits tried to restart the market.
2. Long Island recorded 6,249 foreclosures in 2005, which more than doubled to 13,132 in the first 11 months of 2012.
3. The local real estate market has improved little since the financial crisis of 2008. Average prices have risen by just 1 percent since 2010.
4. Many neighborhoods where foreclosures outpace home sales also suffer from high unemployment, sluggish business activity and deteriorating property values. And some also were damaged by Sandy.
"Some of the hardest hit areas [by Sandy] are low- to moderate-income neighborhoods that were already hard-hit" by the housing crash, said Long Island Housing Partnership chief executive Peter Elkowitz.
The larger problem, experts said, is that the housing market is virtually stagnant -- which means the local economy can't easily grow.
"You want a healthy housing market where you have movement . . . where people can sell their house and get a bigger house, or sell and get a smaller place," said Marianne Garvin, who heads the Community Development Corp. of Long Island, a not-for-profit housing advocacy group. "It doesn't feel like our market is that fluid."
Jonathan Olson bought his five-bedroom home in Huntington in 2005 for $770,000 and added a hardwood deck and other upgrades. He put it on the market in May for $679,000, and dropped the price to $599,000 in August. The one offer he got fell through, he said.
"There's just a big gap between supply and demand," said Olson, 54, a senior vice president at Disney Theatrical Group. "It's a buyer's market."
HELP FROM INVESTORS
The sales picture might be even uglier if investors were not buying homes in distressed real estate markets, local experts said. Investors fix the properties and rent them or resell them, said Susan Vincennie, president of LI Profiles, which tracks real estate data.
"That contributes to the health of the local economy because they are creating local jobs," she said.
That process could happen at a faster pace now, as investors seek storm-damaged properties to buy, rebuild and sell.
Amity Harbor resident Pat Lore, a real estate agent who lost everything but the frame of her home to Sandy, is thinking of taking advantage of investor interest.
"I don't want to stay, but financially I'm not going to take a bath on this either," said Lore, whose garage and pool fell into the bay as water poured into her home near the hamlet's peninsula.
Sandy's devastation could have a greater impact on homeowners in distress.
Tim Browne learned in 2011 that his lender, CitiMortgage, was foreclosing on his three-bedroom Long Beach home just a block from the shore.
A year and a half later, just days after his home was swamped by Sandy's surge, Browne received a letter from his bank approving a three-month trial for a loan modification, and he began paying the mortgage again.
Browne, 44, a construction supervisor and father of three, said the house may need to be leveled and rebuilt, but he and his sons, ages 10, 11 and 15, will remain in Long Beach.
"I wouldn't give up," he said. "We love the water, we love fishing, we love the whole neighborhood."
NOT WALKING AWAY
Few homeowners seem to be walking away from their storm-damaged, foreclosed homes, if only because they cannot afford to go elsewhere, said Karen Ferrare, a Westbury foreclosure attorney.
But many are no longer trying to pay their mortgages, she said. Instead, they intend to stay in damaged homes while fighting foreclosure. It takes almost three years on average to foreclose on a New York home, the longest delay in the nation, partly because of court procedures that aim to protect homeowners, and partly because of the high volume of foreclosures, according to national foreclosure data provider RealtyTrac.
Ferrare predicted a jump in new foreclosure filings in storm-damaged areas. Some homeowners there "can barely afford to pay their mortgage," she said. "Now they're saying, 'My house is gutted. Do you think I'm going to pay a mortgage that was adjustable, that was subprime, that I never should have had in the first place?' "
Sandy's impact could push other homeowners out of the area, too, especially if they have little equity or owe more than their home's value.
"We're getting a lot of calls from people saying, 'We've had it with Sandy,' " said Patricia Daniels, an agent with Douglas Elliman in Huntington.
But real estate agent and investor Beth Marten, whose own properties were badly damaged, said any Sandy-related impact should be temporary, possibly lasting about a year.
For now, home buyers have the upper hand. Sandra and Richard Hlenski sold their Huntington Station house at a $75,000 loss last year, but after looking for six months, they bought a four-bedroom home in Huntington for $600,000 -- a price Sandra Hlenski said she considered a bargain, especially when the house was listed at $649,000. "Even though I lost money" on the previous home's sale, "I kind of got it back this way," she said.
WAITING FOR A 'CLEAR MARKET'
Long Island Association chief economist Pearl Kamer said a full comeback won't happen until foreclosures "clear the market."
That period could extend longer in neighborhoods hurt the most by the housing market downturn. Areas where home sales and prices jumped nearly a decade ago, partly due to easily available, high-interest subprime loans, are now suffering losses in sales and increases in foreclosures. In Mastic Beach, for example, the number of home sales fell from 404 in 2005 to 89 in 2012. The number of initial foreclosure filings there rose from 85 in 2005 to 181 in 2012.
Even ridding the market of foreclosures may not resolve the underlying economic problems that are slowing Long Island home sales. Job losses and high taxes are at the core of the Island's troubles -- and the lack of affordable multifamily housing won't help, said Housing Partnership chief Elkowitz.
"It's almost like the perfect storm," he said. "You have people who lost their jobs or are underemployed, you have taxes still going up and you have no rentals and the wrong housing stock."
For years, people in the industry said, those issues didn't matter as much. Long Islanders lived off real estate, often borrowing against rising home equity for their spending needs. So, the region's economic successes were often housing based.
"As long as you could keep on playing the game, it was fine. But once the game stopped, then the house of cards fell," said Dottie Herman, president and chief executive of Douglas Elliman real estate.
The housing crash has hurt not just homeowners, but plumbers, landscapers and furniture shops, as well as restaurants, retailers and more.
Real estate attorney Smith-Mines said there's less interest in home ownership. As some people back away from the market, others may follow. A class she had planned for buyers was canceled this fall because of low enrollment, while a class for sellers was full, she said.
Herman said, however, "I don't think it's doomsday." After Sandy, "It's a slow build-back. . . . Everyone has to readjust."