As the stock market continues on a somewhat rickety rollercoaster ride, some of us have bailed out and are now holding onto cash. Others are wondering what the best investment is these days. Either way, real estate has to be considered. With the introduction of “Home Base”, our coverage of the real estate market as it relates to families, GALINA ESPINOZA takes a look at… The up-and-down market: Is this the time to buy?
When it comes to real estate, what matters, they say, ‘location, location, location’. Right now, few locations are hotter ? or more expensive ? than the New York City area.
“The perception is that the New York economy is booming and that the city is a great place to live again,” says Robert Brown, a real estate attorney who handles residential properties in the five boroughs. “At the same time, earlier success in the stock market has put money in people’s pockets ? and they’re willing to spend it.”
That’s bad news for parents looking to buy a new house or apartment right now. They may find their visions of a perfect, affordable place in one of the five boroughs or the suburbs of Long Island or Westchester County quickly transplanted by the realities of bidding wars and requests for all-cash payments.
Fortunately, there’s also some good news to report: If you can wait a few months, chances are the sizzling New York City real estate market will cool off.
“We are absolutely at the top of the real estate market, and there are already signs in Manhattan that demand for brownstones and co-op apartments is starting to lose a little ground,” says Richard Loessler, executive vice president of secondary marketing for Roslyn National Mortgage. “It looks like the supply of inventory is finally going to start catching up with demand from buyers.”
What makes real estate pros so sure that property prices are going to come down? The fact that the very forces that combined to give the current real estate market its sizzle are burning out. Many Wall Street analysts are warning that the market will dip even lower over the next 12 months. And while there’s no direct correlation between how well the stock and real estate markets perform, experts say that if investors start to believe the economy is slowing down, they’ll be less eager to throw money at big-ticket items like new houses. “The less optimistic people are about their finances, the more housing opportunities will open up,” Loessler explains.
At the same time, interest rates have been hovering at historically low levels, with the 30-year fixed mortgage rate at around 6.6%, compared with the 7% to 8% range we’ve generally seen during the past several years. That’s made acquiring a mortgage more attractive than at any time in recent memory.
“With rates where they’re at, people who may have put off buying property are jumping into the market,” says Christopher Avena, operations manager for National Foreclosure Corp., which renovates and then sells foreclosed properties. “As a result, neighborhoods that have good school districts and that are convenient to all kinds of transportation are places you can’t even touch.” Still, most investment strategists don’t think interest rates have room to fall much lower. And if rates start to creep up, potential home buyers will be put off.
Similarly, many real estate industry experts say that since the early 1990s, with the economy booming, New York City housing prices have climbed up around 50%; in some highly desirable neighborhoods ? such as Brooklyn’s Park Slope ? prices, in many cases, have doubled. “Eight to 10 months ago, brokers in Park Slope were searching for houses to put on the market because things were selling so fast, and at such high prices,” attorney Brown says. But Brown and others assert that the weakening stock market reflects concerns that the U.S. economy is also losing its vigor. If that’s the case, demand for property will slow, cooling off prices on apartments and houses.
The bottom line? “By spring, we’ll have a much better idea of where the economy is headed,” Richard Loessler says. “So if you can wait until then, you’ll be well served.”
