Long Island doesn’t do anything the easy way. Take a look at the time and money it takes to purchase (or sell in this economy) a home. The cost is just the beginning. I sat in on a closing recently and was amazed at the amount of time, paperwork and effort it takes to simply exchange money for a key, but I digress.
The rule of thumb has it that one shouldn’t spend more than two and a half times his or her gross income to buy a home. So if you make $100,000 a year, you should not buy a home valued at more than $250,000, which presents an issue. The median salary on Long Island ranges from $90,536 in Nassau to $81,029 in Suffolk. Even less than our $100,000 example, making the picture all the more bleak—how many $250,000 homes are on the market?
We all know about the near-glacial status of the economy and, as a result, the housing market. There is no need to revisit; glaciers don’t move much. Aside from a few niche markets, there are not a lot of positive things to say about the status of residential real estate. That being said, the median home price in Nassau remains above the $400,000 mark (about $420,000 at the time of this writing) and about $100,000 less in Suffolk.
It doesn’t take a rocket scientist to figure out that the salaries don’t jibe with the housing costs, even in this desperate market. Given the purchasing standard mentioned above, it is a wonder that there are any homes—new or otherwise—being sold. Our lending institutions, which had previously held a revolving door approval policy for home loan applications, are now so stringent that even with the availability of homes out there in the form of foreclosures and short sales (a nifty byproduct of the banks’ activities), loans remain scarce and the housing market remains near idle.
This combination of economic factors has given cause to use of the phrase “vacancy rate” in Long Island’s housing market. This is somewhat disturbing, since it is not a term one associates with the housing market here, at least not with the single-family home, largely because in reality there wasn’t one. Well, as Dylan once sang “the times are a changin’” and now the residential vacancy rate holds significance. At the moment, it is four percent, which market experts equate to nearly 40,000 vacant homes and apartments. That number excludes seasonal vacancies, which obviously would only drive that number higher if factored into the equation. As to why the surplus of available homes has not had a more dramatic impact on home prices, that is fodder for another column.
How can you use this information to your gain? Well, one man’s challenge is another man’s opportunity. Despite the dour nature of the housing market, there has been no greater time to get the most house for the money. Whether it is for investment purposes or for a place to call home, now is the time to act for those who can buy without having to sell. Sure you could continue to hold tight to see if the market has truly hit rock bottom, but that will only be known once the market begins to ascend, and then it will be too late.