7 lessons from the U.S. housing crisis

With 2012 ahead and four years since the housing collapse helped push the nation into a severe recession, it might be time to sort out the  lessons from the crisis. Here are changes and trends that will -- real estate experts hope -- revive the housing market and everyone's financial future.

Real estate professionals are, perhaps, more sharply aware than anyone of the impact of the housing crisis and recession. "In 25 years, I've seen the whole gamut: People have gone from being flamboyant about money to being cautious," says Nikki Sturges of Daniel Gale Sotheby's International Realty in Huntington. She notes that not only are people buying smaller homes, but they also want to be clear about heating and electric costs and to be sure they'll have reserves for emergency repairs for refrigerators, ovens and washing machines.

To make sure that people don't borrow beyond their means, most financial institutions have gone back to traditional underwriting standards of lending at 70 percent to 75 percent of loan-to-value ratio, says Michael Vittorio, president and chief executive of First National Bank of Long Island. Generally, a FICO score above 680 is necessary, as well as income verification, like tax returns for the past two years, he says. "And you often have to put skin in the game -- come up with more cash to assure the bank that you won't walk away from the loan and hand them back the keys," he says.

Vittorio says he is concerned that some banks have gone back to being too liberal in lending, and have a very short term memory of the crisis. But many also agree that the new underwriting standards are a double-edge sword. While they are making buyers more financially responsible so that they can't extend beyond their means, "lenders have become so risk averse that they are paranoid and disqualifying potentially good borrowers," says Ehsan Nikbaht, professor of finance at the Zarb School of Business at Hofstra University.

Buyers are reading the fine print and scrutinizing their mortgages, appraisals and refinances like never before. "When a client comes in, they seem to have already familiarized themselves with closing costs, points, title charges and appraisals," says Peter Levy, a real estate attorney in Jericho and past president of the Nassau County Bar Association. They are also more likely to ask, "What will happen to my mortgage obligation if I lose my job in three years or if I get sick?"

Levy warns that they'll still be saddled with the mortgage, and advises clients to have the proper insurance coverage for life, health and disability in place. "That's all part of owning a house -- it's not just the monthly mortgage payment," he warns.

But the consensus among area real estate and financial experts is that the future of housing on Long Island will be tied to the development of affordable rental properties for two key markets: young people looking to build a life on Long Island, and empty nesters looking to sell and stay. "Unless that need is met, the long-term economic viability of Long Island is suspect," says Michael Watt, president of Long Island Inc., Babylon- based small business consultants.

Watt says he hopes that people will either buy homes to live in as a saving tool or as an investment with the understanding that there's a gamble. He says that today's buyers seem much more committed to their homes, most buying with the expectation that they might need to stay put for at least seven to 10 years before they can break even. "People no longer view a house as a speculative investment with a near-term 'flip' option or ATM to pull out cash equity," Guardino says.