By Christian Murray
STAFF WRITER

Housing prices on Long Island and in Queens surged again last month, fueled, experts say, by low interest rates, full employment and a desire by buyers to invest in a tangible asset - rather than the volatile stock market.

The median sale price for existing homes in Suffolk County jumped about 30 percent in March, to $238,900, compared to March 2001, according to the Multiple Listing Service of Long Island. The median price for existing homes in Nassau County rose about 14 percent, to $305,000, compared to the same month last year. And in Queens, the median price was up about 7 percent, to $247,000, year over year.

However, some observers warn that these price rises may be a bubble, one which could be popped if interest rates rise or the region's job growth falters. But for now, prices continue to skyrocket, as the limited housing supply cannot keep pace with strong demand - shattering the dreams of many potential home buyers.

Laura and Vincent Walsh, who live in a two-bedroom house in Rockville Centre with their 3-year-old son, have been looking for a three-bedroom house in the area for about a year. "There is basically nothing livable under $400,000," Laura Walsh said. Most of the houses below that price need their roofs replaced or new plumbing.

"We decided to look out at Suffolk and that was pricy as well," Walsh said. Instead, they have decided to hire an architect to add on rooms to their existing home.

Pearl Kamer, an economist with the Long Island Association, said there are a number of components behind these escalating prices, starting with Long Island's "full employment and continued job growth."

Kamer also said that "with relatively low interest rates, people can afford more house for their money," pushing prices higher. Experts say interest rates are currently about 7 percent for a 30-year fixed conventional mortgage.

Kamer also said there are many people "in the prime home-buying age" of between 25 to 45 who are increasing the demand for housing, in a region where there is a lack of land to develop new homes. But supply is also being hampered as many older people decide to stay in the region.

Many seniors don't want to be dislocated from their families and are moving into small houses or townhouses, said Marie Montchal, vice president of relocation and corporate services for Daniel Gale Real Estate in Northport.

Nevertheless, Kamer warns these prices will not rise forever. "Double-digit increases in home prices have generally not been sustainable," she said, and she fears the area is "developing a housing bubble." Kamer said if income growth is sluggish or job growth declines home buyers may face problems servicing their large loans.

In Queens, prices are rising, but not like they were two years ago, when interest rates were being slashed as recession fears became real. "Prices were jumping something crazy," said Barbara Frechter, president of Glenjay Realty in Forest Hills.

Even Manhattan, wounded by the World Trade Center attacks, saw apartment prices increase 1 percent in the first quarter. And apartments in the TriBeCa neighborhood near Ground Zero accounted for much of the improvement, with the average price rising 25 percent to $1.39 million, according to Insignia Douglas Elliman, the city's largest residential broker.

But Michael Dubb, a partner in the Jericho-based Beechwood Organization, one of the region's largest residential builders, does not view Long Island's price increases as a bubble."This is a unique area because of the finite supply of housing," he said. "There is not enough new construction to meet the demand of 3 million people."

And Dubb's firm has been the beneficiary of the relentless demand: Many Beechwood homes, he said, are being bought straight from the plans.

In his Dix Hills' development, where the asking price is between $800,000 to $1.2 million, his firm has sold 35 out of 72 homes from plans. In Smithtown, his company has sold 52 out of 88 townhouses for around $400,000 - and is yet to break ground.

Bob Wieboldt, executive vice president of the Long Island Builders Institute, an Islandia trade group, said strong demand for housing is also behind an increase in the number of building permits being issued on Long Island this year. In January and February, 1,021 permits were granted, compared to 646 for the same period last year.

But Jim Morgo, president of the Long Island Housing Partnership, said that the latest figures are troubling. "The reason home ownership is called the American Dream is that it brings so much to lower- and middle-income communities," Morgo said. "And when that dream is out of reach, it hurts these communities and their families."

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