Monday, January 13, 2020 / by Michael Axelrad, GRI
Know the landscape if you’re buying on LI
It’s a new year, a new decade, and you’re ready to pursue your dream of owning a home. Is it a good time to do so?
Interest rates are still at historic lows, 3.86% on average for a 30-year mortgage, according to Bankrate.com. But real estate is hyper local. What are the expectations for the 2020 Long Island housing market and, in particular, for first-time buyers?
If your goal is to become a homeowner this year, here’s what you need to know.
Assess the Market
Low interest rates mean first-time homebuyers can afford a higher-priced house than they might have been able to afford a few years ago.
“We see strong demand and not enough inventory” at the low end of the market, making competition for homes strong, said Dan Gotlieb, founder of Digs Realty in Manhattan.
Finding a place to buy at a higher price can be less of a challenge, he said. “If you’re looking for a home at the high end of the market, you are well positioned to get a deal, as these homes have been lingering and will likely continue to do so through 2020.”
Millennials have waited longer than other groups have historically waited to buy their first homes in New York. Many are ready to leave the city, driving up demand in Long Island, he added.
Know, too, that there is speculation among real estate professionals that the market is going to “correct” — meaning prices would dip — which could motivate sellers to sell sooner rather than waiting, said Kelly Forman, a real estate salesperson with Daniel Gale Sotheby’s International Realty in Rockville Centre.
“This means that when people put their house on the market, they are serious sellers,” she said. “This could also increase inventory, giving buyers a bit more choice.”
Remember property taxes
Understand that the amount of state and local taxes that you can deduct from their federal and state tax returns is capped at $10,000, which is a result of changes in the tax law that have been imposed since 2018, advised Bryan Fedner, co-founder of StayMarquis, a luxury rental management company in Manhattan.
Prospective buyers in Suffok should be aware of the Peconic Bay tax and whether they qualify for an exemption. The tax, which is unique to Suffolk County, according to Fedner, adds 2% to the purchase price after the first $150,000. “There is a first-time homebuyer exemption,” he said. But, he added, “certain property value and income thresholds need to be met in order for first-time homebuyers to qualify for the exemption.”
Shop smart for your mortgage
“There are some out-of-the-box programs available for first-time homebuyers on Long Island. Nassau and Suffolk counties offer down payment grants for first-time buyers, and local community banks like Valley Bank offer unprecedented products where qualified buyers can put down less than 20% and not have to pay PMI [an added insurance policy for homebuyers who make down payments on their homes that are less than 20%], and are charged a very low interest rate,” Forman said.
Explore your financing options. “There are still plenty of financing options and the Fannie Mae, Freddie Mac, FHA and VA loan limits have all increased, giving buyers room to increase their budget without needing to bring the higher down payment generally required on a jumbo or non-agency loan,” said Matt Hackett, a senior mortgage and finance expert with Equity Now, a direct mortgage lender in Manhattan.
The good news is, “In some instances, with the current low rates, it is less expensive to own than to rent,” said Gail Carillo, associate broker with Coldwell Banker Residential Brokerage in Ronkonkoma.
What’s the final word? “It’s a good time to be a first-time homebuyer on Long Island,” said Forman