Long Island NY Housing Market: Will 3% Down Help?

Home ownership rates have hit the lowest level in 20 years as the Long Island NY housing market continues to struggle following the financial crisis.
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Bloomberg's Erik Schatzker examines a proposal from President Barack Obama to incentivize the Long Island NY housing market…

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Can Obama's 3% solution awaken enough first time homebuyers to revive the Long Island NY housing market, or will the low down payment plan backfire and cause another housing crisis like we've just emerged from? Time will tell, and we'll keep a sharp eye on the Long Island NY housing market for you right here at our site. Bookmark us now and come back often.
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Long Island NY Housing Market: 3 Biggest Threats

A lot of housing experts and economists are expecting the Long Island NY housing market recovery to gain steam in the new year. But three big factors could still derail the whole ball of wax!

The Long Island NY housing market faces 3 very real threats in 2015.

Biggest Threats to the Long Island NY Housing Market

1. Incomes Not Keeping Pace – Despite a much rosier outlook for jobs, incomes are still not keeping pace with Long Island NY housing market prices. And that could make it hard for buyers to afford homes in the areas they want to live in. Income is not rising fast enough and affordability is a growing obstacle to homeownership.

2. Lenders Too Skittish – Mark Zandi of Moody's Analytics says, the key risk to the Long Island NY housing market recovery is still the difficulty many potential homebuyers have getting mortgages.

Even though Fannie Mae and Freddie Mac recently eased lending standards, it doesn't mean lenders are going to take it easier on borrowers. In fact, many lenders may still be too nervous to lend to borrowers who don't have near perfect credit or large cash down payments.

In addition, former homeowners who lost their home to foreclosure may have to overcome damaged credit histories financial burdens brought on by the recession. Meanwhile, Millennials who might be looking to buy have short-lived credit histories and heavy debt loads from student loans to contend with.

3. Sharp Increase in Mortgage Rates – While Fannie Mae doesn't expect to see a sharp jump in mortgage rates, the Federal Reserve could surprise everyone and send its benchmark rate higher than it's projecting.

The Fed is uncharted territory, and if it pushes rates up, it could have a big impact on the market.

Stan Humphries, chief economist for Zillow, said if rates climbed to 6%, it would mean home buyers in some markets like the Long Island NY housing market would be spending more than half of their income for housing.

That would probably mean home prices would have to come down to more affordable levels or sales would slow to a crawl.

Other factors not even part of our 3 biggest threats to the Long Island NY housing market include foreign buyers and investors. What happens if they all stop buying, which is starting to happen in some parts of the country.

Stay tuned, we'll keep you updated on Long Island NY real estate throughout the coming year. Find more Long Island NY housing market news to your right under our Long Island NY Real Estate Categories. And don't forget, we post daily tips on Facebook and Twitter. Be sure to check us out there as well.

Long Island NY Real Estate News – January 2015

Long Island NY Real Estate News - January 2015

In our Long Island NY Real Estate News for January 2015:

Long Island NY Housing – What to Expect in 2015

As we turn the calendar to 2015, it seems only fitting that we explore Long Island NY housing and some of the things to watch for in the new year.

2015 Long Island NY housing forecast and what to expect in the new year.

Long Island NY Housing – Prices, Inventory and Sales

Let's start our look at Long Island NY housing with Prices, and what's expected to happen in 2015.

When all the figures are in, it appears Long Island NY housing prices – as measured by the national repeat sales index (Case-Shiller, CoreLogic) – will be up about 5% or so in 2014 (after increasing about 12% in 2013).

Some of the key factors in 2012 and 2013 were limited inventory, fewer foreclosures, investor buying in certain areas, and a change in psychology as buyers and sellers started believing house prices had bottomed.  In some areas, there appeared to be a bounce off the bottom – but that bounce appears to have ended in 2014.  The investor buying has slowed – as have distressed sales.

The consensus of housing analysts appears to be for price increases of around 3.5% to 4.0% in 2015.

Inventory – It appears housing inventory bottomed in early 2013. The question is, will inventory increase further in 2015, and, if so, by how much?

Inventory is not seasonally adjusted, and usually inventory decreases from the seasonal high in mid-summer to the seasonal lows in December and January as sellers take their homes off the market for the holidays.

The Long Island NY housing market is slowly moving back to normal, and real estate is very local, as we all know. But our best guess at this point is, available inventory will increase further in 2015. If this holds true, it will keep home price increases from going to high too fast, which is never a good thing for the Long Island NY housing market.

Sales – CoreLogic released its 2015 Housing Outlook that shows home sales will increase by 9 percent. The most important economic trend is that employment growth for millennials began to improve in 2014, with the 25- to 29-year-old segment experiencing a 3 percent improvement in employment growth — one percentage point higher than the overall employment growth rate. That's important because this age group is the key first-time homebuyer segment.

When it comes to the Long Island NY housing market, 2015 may be the year first-time home buyers make a comeback. With rents rising faster than incomes, many Millennials are expected to start looking to buy homes of their own.

Here are two more Long Island NY housing market trends economists and other industry experts expect to see in the year ahead, in additon to the price expectations and inventory projects we just covered.

Looser Lending Standards – In early December, Fannie Mae and Freddie Mac put new lending guidelines in place and started offering 3% down payment mortgages that will make it easier for more first-time buyers to qualify for a mortgage.
Add to that a strengthening job market, and prospects look much brighter for young home buyers.

First time home buyers are important to the overall Long Island NY housing market because a spike in the number of first time home buyers should spark a chain reaction by enabling existing homeowners to sell their homes and buy more expensive ones.

Mortgage Rates – If there's any single market trend that real estate industry pros have gotten consistently wrong lately, it's the direction of mortgage rates. But most do expect rates to rise at some point in 2015.

In December, the Federal Reserve signaled that it would not raise the Federal Funds rate until the summer of 2015 or perhaps even later.

With the mortgage rate guessing game continuing as we start the new year, many experts believe rates will peak in 2015 at 4.75% for a 30-year fixed rate mortgage, and even if they hit 5.00%, that's still a very favorable rate, historically.

An increase to 4.5% from the current 4% adds about $60 a month to mortgage payments on a loan with a principal balance of $200,000. Not enough to keep buyers away, when rental rates are increasing much faster, comparitively speaking.

As the economy improves and salaries rise, Millennials are expected to become a bigger force in the Long Island NY housing market in the new year. Households headed by Millennials are expected to see significant growth in 2015, particularly as the economy continues to make gains.

Millennials are expected to drive two-thirds of household formations over the next five years, according to a report from the National Association of Realtors. The forecasted addition of 2.5 million jobs next year, as well as an increase in household formation, are the two factors that realtor.com® points to in driving more first time home buyers to the Long Island NY housing market.

As always, we'll continue to track all of these Long Island NY housing trends for you throughout the new year and keep you updated right here.

Next Long Island NY Housing Market Crisis Looming?

Many lenders in the Long Island NY housing market fear another ticking time bomb may be looming on the horizon as a result of homeowners with home equity lines of credit that will soon be changing how much they pay each month.

The Long Island NY housing market could be facing a new crisis with home equity lines of credit terms about to start increasingSome lenders see the problem as potentially triggering some of the same issues for borrowers that led to the housing bust in the 2000s, even though the years of scrutiny and regulatory efforts that followed that bust have made the financial system a lot safer.

In many cases, homeowners got mortgages with low introductory teaser repayment rates, allowing them to qualify for larger loans because of their lower upfront payments. However, many of these mortgages had provisions that called for sizable increases in monthly payments within a few years.

When the Long Island NY Housing Market Collapsed

As long as the Long Island NY housing market remained hot and prices kept rising, homeowners had the option of selling their home and reaping a sizable capital gain in the process. But when Long Island NY home prices fell and the Long Island NY housing market was flooded with homes, those who had taken those mortgages found themselves underwater, with no way to sell, and frequently no way to handle their loan payments.

Regulators have, since that time, targeted negative-amortization and interest-only mortgages. Lenders now must require borrowers to demonstrate their ability to repay those loans even after reset-provisions take effect and boost monthly payments.

With many home-equity lines of credit approaching that 10-year milestone, banks now worry about the impact of those much-higher monthly payments on borrowers.

Many lenders have moved most of their customers toward home-equity lines of credit that require early repayments of principal. The hope is that customers will get used to relatively flat payments based on the amounts they have outstanding, rather than facing the sticker shock that an abrupt change in repayment terms during the course of the home-equity line of credit can cause.

Even if home-equity lines require principal repayment, only those who've already maxed out their lines will have to figure out how to get money from elsewhere to make the resulting higher monthly payments.

Despite all the new regulations aimed at the mortgage market, in the end, it will take responsible money management from borrowers to ensure that home-equity lines of credit don't create the same trap for the unwary that ordinary mortgages did in the run-up to the Long Island NY housing market collapse.

Check out our other articles and news affecting the Long Island NY housing market and the mortgages that support the market by clicking on the Long Island NY Mortgage Info link to your right under Long Island NY Real Estate Categories.

Long Island NY Housing Market Newbies Beware

The Long Island NY housing market has seen a tremendous bounce in pricing over the past two years, but so far, 2014 is not looking like it will break records from 2012 and 2013. Almost half (around 42%) of all residential home sales in the first quarter were all cash deals. The same is happening all across the country.

The Long Island NY housing market continues to post strong sales, only stymied by the same old story — not enough houses on the market to meet the demand.

Get complete Long Island NY housing market news and home sales information by clicking the Long Island NY Real Estate News link to your right under Long Island NY Real Estate Categories.