For Long Island homeowners, the past two years have provided a steady stream of bad news. Regional median home prices peaked in the summer of 2007 and have fallen more than 20 percent since, stripping wealth and leaving many owing more on their mortgage than their home is worth.
But the historic plunge has an upside, real estate experts say. Potential first-time home buyers - some of whom had been priced out of expensive homes in Nassau and Suffolk counties - may now have a chance to crack the Long Island housing market with the help of lower prices, attractive mortgage rates and their own government bailout.
Here are six things they need to know.
Price, rates make market affordable
"I think its an excellent time for a first-time buyer to get into the market," says Marianne Garvin, president of the Community Development Corp. of Long Island, a nonprofit with offices in Centereach and Freeport that provides counseling for first-timers. "There are lots of options out there for affordability that even a year or two years ago didn't exist."
In February, the median closing price for a home in Nassau County was $400,000. That's down from $458,800 the same month last year and $502,500 at the peak in August 2007. In Suffolk County, the median closing price for a home was $309,500 in February, down from $359,500 in February 2008 and $420,000 from its peak in June 2007.
Homes in neighborhoods that may once have been unattainable financially have fallen into many first-timers' price ranges, real estate experts say. On top of depressed prices, mortgage rates for qualified buyers also have fallen to historic levels. The national average for a 30-year fixed-rate mortgage on March 19 was 5.29 percent, according to the Web site Bankrate.com, which follows mortgage rates through surveys. That's driven up business for some real estate professionals. "I'm seeing more activity this year," says Dorothy Aschkar, a Realtor at Fairway Homes in Queens Village, which has listings in Nassau and Suffolk, who says 80 percent of her clients are first-time home buyers. "The need is there, and they're taking a step forward to enter the market."
File for new tax credit
On top of low prices and rates, there's one more carrot out there for first-time home buyers: A tax credit approved as part of the economic stimulus package signed into law last month is meant to boost housing markets by giving first-timers up to $8,000 to cover closing costs or a portion of a down payment. Singles making $75,000 or less, or couples making $150,000 or less (figures are modified adjusted gross incomes), qualify for the government payout if they buy a home on or after Jan. 1 and before Dec. 1.
The credit can be claimed on home buyers' 2008 or 2009 tax returns.
For those first-timers who bought last year, there's still help: a $7,500 tax credit that must be repaid - essentially an interest-free government loan - is available.
The law defines a first-time home buyer as someone who has not owned a principal residence in the past three years.
Get preapproved, then browse
Getting preapproved for a mortgage to set an affordable price range before looking at homes should be any first-time home buyer's first step into the housing market, real estate experts agree. Be prepared to show a potential lender monthly income statements, recent tax returns and information regarding any other debt, such as credit cards or student loans, they say.
But here's the catch: While today's mortgage rates and real estate prices may make for a more attractive market, getting that approval may be difficult. Lending standards have tightened across a financial industry imperiled by bad loans. People have to reset their expectations according to the guidelines, says Bob Moulton, president of Americana Mortgage Group, a brokerage firm in Manhasset. Prospective first-time home buyers expecting to get approved for a loan should have a credit score of 720 or higher, Moulton says.
Larger down payments also can be more important in this economy, says Kirk Kordeleski, president and chief executive of Bethpage Federal Credit Union. In the past, Kordeleski says, lenders who felt protected by high rates of housing appreciation placed less value on credit history and down payments. "Now we've gone back to a traditional marketplace, where you have to have money to put down," Kordeleski says. "If you have that 10- to 20 percent, getting approved is not that difficult.
Explore other borrowing options
Lenders demanding pricey down payments, however, aren't the only options for first-timers. Federal Housing Administration loans are available with down payments as low as 3.5 percent and financed closing costs. Qualified borrowers must have reasonable credit - although a score of 700-plus may not be necessary - and demonstrate an ability to make payments, says Lynn Law, director of education and counseling at the Hauppauge-based Long Island Housing Partnership Inc., another nonprofit counseling agency.
The State of New York Mortgage Agency offers up to 100 percent financing, plus assistance with closing costs, for eligible first-timers. George Leocata, a senior vice president with the agency, suggests obtaining a preapproval from a participating lender before shopping for a home. Income and home-price guidelines apply. Find eligibility requirements and those participating lenders at nyhomes.org/index.aspx?page=271.
Also, don't overlook local programs offering down payment assistance, like those in Nassau and Suffolk counties and the Town of Babylon. (Look for contact information in the box above.)
Counseling help is out there
Not only is education available for potential home buyers at nonprofits such as the Community Development Corp. or the Housing Partnership, but most services are offered free of charge. Services range from brokering loans to one-on-one credit counseling to group classes covering basics of purchasing, financing and maintaining a home.
Counseling is available not just for prospective buyers who are mortgage-ready, but also for those who need time to save for a down payment, or others whose credit problems prevent them from qualifying for a loan and entering the housing market immediately.
Also, buyers don't need counselors for everything. For example, the Multiple Listing Service of Long Island's Web site, mlsli.com, is helpful for regional home listings, statistics, neighborhood information and finding a realtor search.
Is now the time?
Of course, no one wants to buy a home only to have its value depreciate. So one question still is keeping many on the sidelines, even in this buyer's market, real estate experts say.
Where is the bottom? The answer: No one knows for sure, but economists estimate.
Pearl Kamer, chief economist for the nonprofit business group the Long Island Association, says she expects Long Island's prices to drop about 10 percent from today's values before settling sometime early next year. Action taken by the government to buy assets and push down mortgage rates could mean the market would bottom out quicker, Kamer says, but not much quicker. "Late this year, early next year is the most optimistic scenario I can imagine," says Kamer. "The question is, can you wait, or do you need a home now? It's an individual household thing."
Where to find help
• The Long Island Housing Partnership administers down payment assistance programs for Nassau County and the Town of Babylon. Call 631-435-4710 for more information and to put your name on a list to receive applications when they become available. An online application and eligibility guidelines for Babylon's new program, offering a $15,000 match for middle-income families, are available at townofbabylon.com/whatsnew.cfm?id=286.
• For details about a Suffolk County down payment assistance program and to get on a list to receive that application when it's available, call 631-853-5705.
• Community Development Corporation of Long Island, a nonprofit housing agency, offers counseling for first-timers and information about financial assistance that may be available. Visit cdcli.org for more information. To register for a first-time home buyer orientation session held monthly in Nassau and Suffolk, call 631-471-1215 and dial ext. 144, or e-mail home email@example.com. Provide your full name, mailing address, day and evening telephone numbers, and include the location and date of the session you would like to attend.
• Federal Housing Administration loans are available with down payments as low as 3.5 percent, with financed closing costs. Visit www.hud.gov/buying/loans.cfm for more information or call 800-569-4287 to search for counseling agencies using your ZIP code.
• The State of New York Mortgage Agency offers several programs to help first time home buyers get into a home. Financing up to 100 percent is available, 97 percent in some programs. Closing cost assistance is also available. Visit nyhomes.org/index.aspx? page=48 or call 800-382-HOME for more information.