Many economists and experts surmise that the Long Island real estate market’s road to recovery may gain steam during the onset of the New Year. However, three huge factors still pose a threat to the recovery effort. Here they are below:
1.Incomes Not Being Able To Keep Up
Despite the increase in employment rate and availability of high paying jobs, employee incomes are still unable to keep up with the constantly-changing Long Island real estate prices. This phenomena could make it extremely difficult for potential buyers to afford their dream homes in the locations that they want to live in. Apparently, incomes are not rising at a rate that can keep up with the constantly rising real estate prices, thus making affordability a growing problem to home ownership.
2.Lenders Are Being Too Cautious
According to Moody Analytics’ Mark Zandi, another key threat to Long Island real estate market’s recovery is the fact that many potential home buyers are still having difficulty getting mortgages. Even though a great number of lenders have recently toned down on their lending standards, it does not mean that they are going to go easy on the borrowers. As a matter of fact, many lending companies are still extremely nervous to lend money to mortgagors who require large sums of cash for down-payments or do not have a flawless credit rating.
Also, former homeowners who lost their homes due to foreclosure may have to overcome problems brought about by damaged credit ratings that resulted from the recent recession. In addition, Millennials who are looking to purchase a home doesn’t have a long-enough credit history, plus they also have to contend with student loans that makes a significant negative impact on their credit history.
3.Abrupt Mortgage Rate Inflation
While many lenders don’t foresee a sharp climb in mortgage rates, the United States Federal Reserve could catch everyone off guard and put its benchmark rate higher than what they initially projected. The Federal Reserve is basically uncharted territory. If they shove the rates up, it could have a significant impact on the real estate market.
Zillow’s chief economist Stan Humphries stated that if mortgage rates rise up to 6%, this could mean that potential home buyers, especially in the Long Island real estate market, may have to spend more than 50% of their salaries just for housing. If this happens, home sellers have no choice but to pull their prices down to more reasonable levels. If not, sales rates would slow down to a turtle’s pace.
4.Foreign Buyers and Investors Bugging Out
We all know that as prices of real estate rise, so does the taxes that come with it. For most foreign investors or buyers, paying huge taxes on top of an already expensive real estate price is just too much to deal with. This is the reason why most of them bug out of the real estate market. Do keep in mind though, that foreign investors bugging out doesn’t only happen in Long Island. This phenomena can be clearly observed all over the country. What negative impact will investors turning tail bring to the real estate economy? Only time will tell.
The real estate market is as fragile as ever. But do not let these factors hinder you from getting the property you think you deserve. As we mentioned in the beginning, the Long Island real estate market is on its way to recovery. Hopefully, the market ends up recovering successfully so we can all live happily ever after in that nice home that we’ve always yearned for.