June’s arrival has us looking forward to summer on Long Island: Sun, surf and a housing market that has been heating up following years of shivering in the shadows of economic malaise.
An April 2013 story in The Wall Street Journal said that nationally, residential land ready for development was going up in price with an increase of at least 10 percent. Market expansion is a good thing, especially after years of market contraction. For the consumer, it may be bittersweet as those land costs, which account for about one-quarter of a home’s total price, are traditionally passed on to the buyer. Market speculation is the primary driver behind the increases. Long Island may see some impact from this trend, though it will likely happen further in the future because projects with faster turnaround potential are pursued off the Island first.
The spike in costs of empty lots is indicative of the recovery where nationally there are pockets of sales activity. The rapid recovery has raised concerns according to the real estate services firm Redfin. Its agents described the market as being “bubbly,” in reference of the last housing bust. But that is not the case here, where slow and steady best describes the real estate recovery.
Longtime residential developer Len Axinn, president of Ronkonkoma-based Island Estates Homes, confirmed that the real estate market has returned. His model homes went from having cobwebs in the doorways to being busy with people. “We had one condominium project where in the last 16 months ending in February we sold one unit. In the last six weeks we sold five units,” Axinn said.
Frank Paruolo, co-owner of Century 21 Bay’s Edge Realty in Sayville, agreed, noting a sleeping market was awoken in the first half of 2013 with inventory of available homes down 25 percent. “People are buying, fewer homes are hitting the market and prices are going up,” Paruolo said. To a degree buyer reluctance remains, especially if there is a need to sell a home first. Regardless, Paruolo said the first half of the year was a step in the right direction and the second half should continue that trend.
The Long Island market will have to work hard to catch up to growing demand since there isn’t much in the development pipeline, at least in the short term according to Axinn. If the market continues to recover, the window of opportunity for taking advantage of historically low interest rates and lower home prices will be closing very soon. Don’t be left out in the cold.
25% of a home’s total price is the cost of its land.