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LI home prices still below peak in mid-2000s boom

Jackie, left, and Tim Dunn, from Jackson Heights,

Jackie, left, and Tim Dunn, from Jackson Heights, Queens, with their daughter, Angelina, 3, arrive at an open house on Cheshire Road in Bethpage, and are greeted by broker, Carole Ann Catapano from Century 21, Catapano Homes, on Sunday, July 12, 2015. Credit: Linda Rosier

Long Island home prices have made a sluggish recovery from the housing crash, and still haven’t gotten back to the peaks they reached during the mid-2000s boom, even as the nation’s real estate market now exceeds its boom-time heights.

In Suffolk County, homes sold for a median price of $326,000 last month — 21 percent below the county’s record high of $420,000, attained in June 2007, the Multiple Listing Service of Long Island reported this month.

Nassau County also fell short of its housing-boom records. Last month Nassau homes fetched a median price of $437,000, down 13 percent from the county’s apex of $502,500, reached in August 2007.

By contrast, home prices nationally have recovered fully from the burst of the housing bubble. Across the country, homes sold for a median $224,100 last year, the National Association of Realtors said Friday. That’s 0.99 percent above the summit of $221,900, which the country hit in 2006. The prices are not adjusted for inflation.

Real estate analysts are now closely watching the stock market, employment reports and other economic data, worried that stock market gyrations could slow, or even reverse, the local housing market’s progress in the coming year.

Listless recovery on Long Island

During the housing boom Island home prices became “overinflated,” and now they’re at a more sensible level, said Joe Moshé, broker/owner of Plainview-based Charles Rutenberg Realty. “For people to think that they’re going to get back to the pricing of 2006 without a greater surge in industry, in the job market, I think that’s a falsity. It’s not going to happen.”

The Island’s comparatively listless recovery in home prices reflects its loss of high-paying jobs in the manufacturing and financial sectors in recent years, combined with its high cost of living and dearth of homes that local families can afford, economists said.

“Long Island has some intrinsic weaknesses at this point in time that we are going to have to address,” said Herman Berliner, dean of Hofstra University’s Frank G. Zarb School of Business.

If the Island can become more welcoming to employers — especially high-paying technology businesses — and build more apartment buildings near downtown train stations that are appealing for young people, he said, “you’ll find that housing will respond very well. We’re a wonderful place to live, but we’re obviously very high-cost.”

Taxes blamed for high housing costs

Homeowner Regis Staley said property taxes bear some blame for Long Island’s high housing costs.

The 65-year-old retired attorney and his wife, Maureen, listed their four-bedroom Colonial home in Amityville for $449,000 last year. Staley bought the home nearly 40 years ago, when he was in law school, for about $50,000. He has since added a second story, a pool and other features.

When he bought the home, he said, “housing on Long Island was expensive, but it was in my mind relatively commensurate with, let’s say, white-collar wages. What has gone up exponentially is the taxes. . . . The real estate taxes are roughly half of the mortgage payment. That wasn’t the way it was when I first moved here, and it’s not the way it is in other parts of the country.”

The Staleys plan to move to South Carolina, where their property taxes will be much lower, he said.

Staley, who has two grown daughters, said he is “philosophical” about the slow recovery in home prices since the crash. “It’s like any commodity,” he said. “What a home is worth is what somebody’s willing to pay for it.”

Island pays price as housing takes hit

During the boom the Island benefited from strong demand for housing, as homebuyers flocked here for the region’s high-paying financial-sector jobs and cultural attractions, said Irwin Kellner, president of Kellner Economic Advisers in Port Washington. Low-cost, adjustable-rate mortgages and loose lending standards fueled the boom, he said.

But home prices spiked too fast, rising to as much as six times the Island’s median income — roughly double what they should be, Kellner said. And when the nation’s economy and housing market cratered, the Island’s fell even harder, he said.

Indeed, Long Island had a more dramatic run-up in home prices than the nation as a whole, followed by a steeper slide. In Nassau and Suffolk median home prices more than doubled from January 2000 until each county’s peak — a 152 percent gain in Suffolk and 123 percent in Nassau, according to listing service data.

After the 2007-2009 recession, median prices plummeted by 27 percent and 30 percent, respectively, in Nassau and Suffolk.

Across the country, the trends were more gradual, with the median price rising by 55 percent from 2000 to the 2006 peak, then falling 25 percent by 2011.

Now, job creation on the Island is skewed toward lower-paying jobs in retail and health care instead of more lucrative careers in manufacturing or the financial sector. For instance, in December the Island’s well-compensated financial activities and manufacturing sectors both reported annual losses of 0.4 percent — shedding about 300 jobs each — while lower-paying education and health services jobs grew by 5 percent, or 12,500 jobs, the state Department of Labor reported Thursday.

Furthermore, banks have imposed stricter lending standards. “A lot of the people who would like to buy a house can’t right now because the banks are pretty tight on lending, and [buyers] can’t scrape together enough of a down payment,” Kellner said.

Plus, the recent stock market turmoil could lead to an economic slowdown, Kellner said. If that occurs, home prices could drop by 5 percent or more this year, he predicted.

Hofstra’s business school dean, Berliner, said it is too soon to tell if the stock market’s weakness means trouble for the economy as a whole. The overall economy has been showing strength, he said. But if the stock market falls further and stays down, home prices could fall as consumers lose confidence, he said.

Brokers remain optimistic

Although economists worry that the bad start to the year in the stock market could spill over to home prices, some brokers remain optimistic, pointing out that the unemployment rate and mortgage interest rates are low.

Long Island’s jobless rate fell to 4.1 percent in November, the latest available state labor figures show. The region added 19,900 jobs last month, a year-over-year gain of 1.5 percent, the state Department of Labor said Thursday.

The average interest rate for a fixed-rate, 30-year mortgage was 3.81 percent, near historic lows, mortgage giant Freddie Mac reported.

“When the demand [for houses] is high and the inventory is low, the stock market doesn’t directly affect that many people, not in a big way,” said Jerry O’Neill, owner of Coldwell Banker Harbor Light in Amity Harbor. “In the conversations I have with buyers and sellers, the stock market doesn’t seem to be a point of concern.”

In addition, many economists believe mortgage interest rates could inch up this year, if the Federal Reserve continues to raise short-term interest rates. “What typically happens is, in the beginning there’s a rush to the market for buyers, for fear that rates will get higher,” and that gives the housing market a boost, O’Neill said.

As long as rates don’t rise too much, they’re unlikely to pull home prices down, O’Neill predicted: “People seem willing to accept rates in the low 4s. If it gets up in the 5s range, I think that’s going to have an impact.”

To be sure, Long Island’s housing market is no longer in the doldrums.

Suffolk median home prices have risen by 12 percent since their nadir of $290,000 in April 2011, at the depths of the county’s housing downturn, listing figures show. In Nassau, prices are up 20 percent from their March 2012 bottom of $365,000.

Homebuyers’ desire to be close to jobs in the city explains why Nassau has made a stronger recovery than Suffolk, Kellner said.

Western Suffolk communities are finding favor among buyers, too, brokers said. That’s true of Jackson Heights, Queens, residents Jill and Tom Sullivan, who are looking for a home in Dix Hills, in the $800,000 price range.

“Obviously the further out you go, the more time you have to spend commuting,” said Jill Sullivan, 35, a mother of two 14-month-old boys who travels to the city a few times a week for her job as a producer in the entertainment industry. “I basically wanted something where you would get the most for your money, it’s still easy to get to the city, and it’s a good school district.”

And since prices are below their peak, Sullivan said, “we’d be able to afford a slightly better home.”

With home prices off their highs, buyers “are just getting a little bit more for their money,” agreed Jamie Gorman, a real estate agent with Charles Rutenberg Realty, who is representing the Sullivans. “They’re getting a bigger square-footage house, a bigger lot size, maybe something a little more updated, for a better price.”

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