KATHY AND AL GRIMALDI say they have no regrets about purchasing their L-shaped ranch earlier this month. “In the past year, prices have gone up considerably,” said Kathy, a sales manager. “I heard they’re going to go up even more.” After looking for a house for more than six months, the newly married couple expects to close soon on a three-bedroom, two-bath house in Oakdale. Similarly, Shabana Yusuf says she is glad she and her husband, Mohamed, are purchasing their three-bedroom, two-bath colonial in Richmond Hill before the market changes. “Interest rates are good right now,” said Yusuf, who has been renting for three years in Jamaica. But some would-be buyers are apprehensive about what may be coming next. Newlyweds Nicole and Dennis Haas, who are renting in Islip, are just beginning the house-hunting process. “We think it’s going to be hard,” said Nicole, a librarian. “We think the prices are steep now.” Prices have, in fact, been steadily climbing.
In Nassau County, the median home-sale closing price was $290,000 last month, up 14.8 percent from December 2000, according to the latest figures released by the Multiple Listing Service of Long Island. In Suffolk County, the median closing price was $215,300 for December 2001, up 13.3 percent over December 2000. And in Queens, the median price was $230,000, up 15 percent over the same period a year ago. “I think we’ll see the continuation of home price appreciation, but not as great as it was in 2001,” said Joseph Mottola, chief executive of the Long Island Board of Realtors. The National Association of Realtors, a Washington-based trade group, is forecasting an increase of 6 percent for Long Island, compared to the 10 percent annual increases the region has been seeing for the past three years. But some experts believe that even that figure may still be too high considering the economic slowdown. “I think we’ll be likely to see an economic recovery by mid-year and when it occurs I think it will be relatavley weak,” said Pearl Kamer, chief economist of the Long Island Association. “Consumers will be hard pressed to increase spending, given their current debt levels and rising unemployment.”
So Kamer is predicting a generally “flat housing market, or increases of 1 to 2 percent,” although prices may decline at the high end and rise more at the lower end. Several other key trends are expected to shape this year’s market: Many experts believe that the supply of available houses will increase, as empty nesters leave their homes and move into senior housing or gated communities. Construction of new homes is expected to be strong as well, despite the dwindling supply of available land. As new-home developments are proposed, advocates are continuing to push for more affordable-housing units, to help ease the region’s critical need for such housing. Mortgage rates are still expected to be favorable, although they may not dip to the 6-percent levels home buyers saw this year. Experts predict that numbers will climb into the 7 percent range as the economy improves. Also, there are two big changes in store for the industry that will affect consumers.
First, local brokers soon will be able to choose to participate in “broker reciprocity” – a new national policy mandated by the National Association of Realtors that requires that Multiple Listing Services to provide a way for brokers to share property listings with other brokers on Web sites. Second, a new “sellers disclosure” law, which goes into effect in March, will require home sellers for the first time to disclose to buyers a substantial amount of critical information about their property, including environmental, structural, mechanical and other information. “There’s going to be more information available,” Mottola said. “In my opinion, we’re going to see the continuation of a good, healthy housing market.”
Here’s a further look at what to expect:
HOME PRICES The median price of an existing home in the Nassau-Suffolk region is projected to reach $248,600 for 2002, compared to a projection of $151,700 for the nation, said Walt Molony of the National Association of Realtors. “I think we had an outrageous increase in 2001,” said Pat Levitt, president of the Long Island Board of Realtors and owner of Century 21 Mac Levitt, which has offices in Oceanside, Baldwin and Freeport. “I think now prices will become more realistic.”
Tony Smith, owner of SAS Real Estate in Wantagh and president of the Multiple Listing Service, concurred, adding that he is predicting a 3 percent to 7 percent increase in home prices. “You can’t sustain high prices in this economy,” Smith said. The LIA’s Kamer predicts that prices could even drop 10 percent or more at the high end of the market – homes selling for $1 million or more. On the other hand, she said, homes selling below $300,000 could see price increases in the 5 percent to 7 percent range because demand for that category is so strong. Projection figures were not available for Queens, but local brokers, including James O’Kane, owner / broker of ERA O’Kane Realty in Maspeth, say they think prices will increase slightly in Queens, possibly 3 percent to 5 percent. “There is a lot of demand to live in Queens,” said Deow Gangaram, broker with D.N.G. Realty in Jamaica, who helped the Yusufs find their home.
Meanwhile, on the East End, Judi Desiderio, vice president of Cook Pony Farm in East Hampton, says she expects the market to pick up this year based on activity she’s seen so far. Cook Pony saw a 30 percent increase in business this November, compared to last November. “That tells me that people who put off decisions in September and October made them in November and the beginning of December was very good,” she noted. But she expected Cook Pony’s fourth-quarter report of Hamptons housing activity to show similar results to the third quarter, where sales were down in all price categories, particularly in houses $2 million and above. The average price of a Hamptons home was down 9.1 percent from the third quarter last year, dropping from $681,000 to $619,000.
MORTGAGE RATES The average interest rate for a 30-year fixed-rate mortgage was 6.7 percent in November 2001, compared with 7.7 percent in November 2000, says Kamer. Experts such as Melissa Cohn, president of the Manhattan Mortgage Co., predict that interest rates will stabilize closer to 7 percent, with less volatility than the fluctuations over the past three months. “I would guess rates will go back to levels we saw in November and maybe lower, based on where we believe the economy will be,” said Jonathan Pinard, president of Nation Residential Mortgage Banking Corp. in Hauppauge and president of the Empire State Mortgage Bankers Association. But Michele Francis, director of sales and mortgage operations at Beechwood Capital Co. in Jericho, questions how long rates will stay low, with the anticipation of economic recovery on the horizon.
HOME BUILDING Despite strong demand for new construction, the industry is somewhat concerned about a slowdown this year due to current economic conditions, says Robert Wieboldt, executive vice president of the Long Island Builders Institute in Islandia. Wieboldt said he does not expect existing contracts to be canceled, but does believe that fewer contracts will be signed for new homes in the $750,000-to-$1 million range, particularly on the East End. Building permits at the end of November 2001 were close to 5,300 for Nassau and Suffolk, compared to 5,572 the previous year, and in Queens for November they were 3,014, compared to 2,646 in November 2000. December numbers are not available yet. So far, Michael Dubb, a partner with The Beechwood Organization in Jericho, said he’s busier than ever. The company has about 1,200 units that will begin construction this year, with many that sold out even before being built like those in Queens Village and Manorville. “I think it’s going to get more pricey,” said Michael Viscardi, who purchased one of the two-family homes in Queens Village even before it was constructed. “I think you should have a wide range of investments and you can’t really lose in real estate.” The Beechwood Organization has been tapped as one of the developers to undertake the $350-million development of Arverne-by-the-Sea, a 100-acre oceanfront community in the Rockaways. “There’s a lot of activity,” said Beechwood’s Dubb.
HOME-SALE ACTIVITY The slowdown in the local real estate market after Sept. 11 resulted in fewer homes sold this December.The number of home-sale closings for Queens and Long Island was down 11.7 percent, from 1,864 in December 2000 to 1,645 this past December. December closing sales generally reflect houses that went into contract about three months earlier. But agents said they do not expect the effects of Sept. 11 to have a lingering effect on the local market.
AVAILABLE HOUSING SUPPLY Experts say they expect to see more housing stock on the market as the population ages and moves into retirement communities. In 2001, 21,604 homes closed for all of Nassau, Suffolk and Queens, with a total closing volume of $5.8 billion, according to data reported by the Multiple Listing Service of Long Island. This was 6.6 percent higher than the 20,260 homes that were reported as closing for the region in 2000 at a total closing volume of $4.9 billion. “More inventory came on the market last year,” said Pat Petersen, chief executive of Daniel Gale Real Estate, which has 13 offices on Long Island. “But it’s still lower than experts had anticipated.” There also have been many units added to the rental market over the years, said Mark Broxmeyer, a partner in Fairfield Properties, a real estate firm in Commack. During the past decade, the number of renter-occupied units in Suffolk rose 12.4 percent, from 84,466 in 1990 to 94,939 in 2000, according to Census Bureau figures. The increase in renter-occupied units in Nassau was 4.4 percent over the same period and the increase in Queens was about 8 percent. Supply has increased at a time when the economy is soft, resulting in more vacancies. Right now the rental market is not as hot as it was a few years ago, said Broxmeyer, who is still planning to build 750 more units in Suffolk this year.
AFFORDABLE HOUSING The affordable housing crunch isn’t expected to ease this year, experts say, with demand still well exceeding supply. “On the positive side, there is more acceptance” of affordable-housing projects by communities that used to resist them, said Jim Morgo, president of the Long Island Housing Partnership. The partnership, which has commissioned LIA’s Kamer to analyze the need for affordable housing in the region, hopes to begin building more than 100 affordable homes on Long Island this year. “There’s an incredible need for affordable rental homes,” added Morgo. “In both counties, the emphasis should be on the redevelopment of previously developed land.” Experts predict the majority of building, if any, would occur in Suffolk, where the bulk of available land is. Last month, Suffolk passed the first $5-million appropriation out of a multi-year $20-million allocation for land acquisition for affordable housing.
The county also approved a resolution to move forward with the first development to be funded, Millennium Hills in Huntington, which will consist of 84 units – 40 rentals and 44 homeownership, says Marian Zucker, the county’s director of affordable housing. “We’ve approved the transfer of vacant and improved land to Islip, Brookhaven, Southampton, West Hampton Village, and the Village of Patchogue for affordable housing purposes,” she added. These are county-owned lands that were taken in tax foreclosure. And despite the tight land supply in Nassau, Howard Blankman, chairman of Nassau County’s Planning Commission, said he is pursuing a plan he proposed to subsidize studio apartments in downtown business districts to help keep young people on Long Island. The commission is working with the Long Island Housing Partnerhip and is trying to finance the purchase of a site in Port Washington. It is also looking at an additional site in West Hempstead. The applicant would have to be a Nassau County resident who just graduated from high school or college and is employed.
BROKER RECIPROCITY “Opening up the real estate process” seems to be this year’s mantra. With broker reciprocity – formally known as the Internet Data Exchange or IDX – agents who are MLS members will allow other members to display their listings on the other’s Web sites. Brokers who participate can display all of each other’s active listings – aside from exclusives – and those who do not participate will not be permitted to display other brokers’ listings. Brokers can choose different ways of participating in broker reciprocity, including getting technical help to build their own Web sites if they don’t already have them, to downloading a daily feed of the broker reciprocity listings. Fees will vary depending upon the level of service.
The Multiple Listing Service of Long Island is setting up the broker reciprocity system, which should be available to consumers by early February, says Jim Speer, director of MLS member services. The National Association of Realtors had set a target deadline of Jan. 1 for MLS networks nationwide to implement IDX solutions, but “in reality, what they really wanted is to have it available [by then] or progressing toward it,” Speer said. We are going way above and beyond what they are mandating.” MLS of Long Island has been testing the system, and it is not clear yet how many agents will opt in. There are 1,500 MLS subscribers in Nassau, Suffolk and Queens. “It’s a benefit to the consumer,” said Carolyn Weber, vice president of Remax of New York Inc. in Mineola. “The sellers and buyers deserve this.”