Presidents Day weekend represented the unofficial kick-off of the spring sales season, though typically the date is associated with hunting for Hamptons summer rentals rather than a permanent abode. As Long Island’s real estate market stretches following its winter nap, experts and amateurs alike are looking for an increase of activity.
Sandy’s effect remains tangible and an already sluggish market had a load of cement powder added to the home-purchasing pipeline as lenders are now focusing more than ever on the quality and validity of inspections and appraised values. This condition has negatively impacted the positive velocity the market was starting to enjoy prior to the storm. The backlogs of insurance claims are also hindering the market’s ability to move forward.
Despite all the bad news, the market weathered the storm and experts anticipate a continuation of the recovery. I asked a prominent developer about this year’s forecast, anticipating that sales of single and multi-family homes would mimic the past. I was wrong. This year is expected to be the healthiest market in the past five with a significant amount of new development to accompany an uptick in the number of existing home sales. Increases in home prices are unlikely, at least for the immediate future, until inventory decreases to a competitive level.
A great portion of that new development will be multi-family homes—to both buy or rent —for two reasons: The scarcity of buildable land available and the softening of municipalities’ views toward this kind of development. From Huntington to Brookhaven to Riverhead, major multi-family projects have been proposed and approved. The ability to build is still limited by proximity and access to sewage treatment facilities, but there are efforts to improve infrastructure in areas where denser development is deemed fit.
All of the above are pieces to the puzzle that will rebuild—no pun intended—the housing market on Long Island. With interest rates still at historic lows and available housing inventory, it will remain a buyers’ market for the foreseeable future. But keep in mind that though home prices are advantageous, the associated taxes may not be as they do not necessarily decline with home prices. For investors thinking of buying to rent out, a trip to the local town hall is in order to confirm whether the proposed use is permitted and, if ok, whether that use will result in a cost-prohibitive tax increase.
The spring sales season will have something to offer to builders, buyers and sellers. For buyers, the phrase caveat emptor has never been truer. Sellers still need to price homes competitively in order to generate serious interest. And for builders, their most difficult hurdle will be gauging consumer demand once the market, and the weather, begin to heat up.