North Fork Real Estate: To Buy or Not to Buy …

I recently wrote about the new Buying Power on the North Fork and how much more affordable the North Fork Real Estate market is today, as compared to 2007, but does that mean that now is the right time to buy? Don’t get me wrong, as a REALTOR® I certainly think it’s an outstanding time to buy, however as an eternal bargain hunter I’m always wondering is there a better deal to be had?

To answer this question, I think we need to look at the length of depressed real estate markets, housing value declines and, of course, mortgage rates.

LENGTH OF DEPRESSED MARKETS: Maybe I’m hopelessly optimistic, but my gut told me depressed real estate markets cannot last too long (or our long-term memories would be so damaged that we would not continue to invest in real estate, no?)…  So internet-digging I went….  Finding data dating back to 1890 (thanks jparsons.net!) I’m able to confirm that during the last 120+ years, most down markets have not exceeded five years — actually only one lasted as long as eight years. So in most cases, we’re already 80 percent through the storm? Let’s keep our fingers crossed!

VALUE DECLINES: Fortunately our local market has fared rather well as compared to other areas of America during this housing decline. Suffolk Research Service's market data for the township of Southold reports home values fell during 2008, ’09 and ’10 with decreases in value (respectively): -4.76 percent, -7.5 percent and -4.86 percent. However, median prices in 2011 remained exactly the same as 2010 (no further decline). Could this also mean the end of our North Fork value decline is closer than we think?

Obviously, no one has the answer to how long the national housing market will continue to fall, or at what rate if at all, however here’s something to ponder if you’re hoping to wait for the real estate bargain of a lifetime ...

Say you buy today and pay $375,000 for a 3 bedroom, 2 bathroom ranch, and put down 20 percent. With current mortgage rates averaging 3.92 percent, your monthly mortgage payment would be $1,418.44 for 30 years, or a grand total of $510,638 in payments and you own a home TODAY.

But if you’re the bargain shopper type, hoping to gamble and you wait another year to see if median prices will fall, and as the buyer you actually get lucky with say … a 4.86 percent decrease in home values (like we saw in 2008), HOWEVER (did you hear the hammer drop?!) interest rates return to where they were only one year ago (4.81 percent), you’re mortgage payment would be $1,499.25 for 30 years, or a total of $539,730 in payments for the “cheaper” house.  Yes, you would have saved $18,225 in purchase price, however the cheaper house will actually cost you $29,092 more in payments.

Here’s the kicker, now you’ve missed living in your house for that 365 days and you are out roughly $21,600 ($1,800 a month) you paid to rent a 3 bedroom, 2ba house.

Yes, this is certainly very “what-ify,” but now the “gambling buyer” waited another year to buy and is actually $32,467 (29,092-18,225+21,600) poorer for the same house (that was actually cheaper), and they’ll get to live in it for one year LESS.

And yes, I tend to do this type of analysis for all major purchases I make, aren’t you glad you’re not my poor husband?!

 — Nicci Fitzgerald, North Fork Real Estate, Inc.