There is no way to sugarcoat the news when it comes to the housing market. Anyone trying to sell a home or get a mortgage — or, for that matter, anyone who doesn’t live in a cave (hopefully that’s not coming next) — knows it’s been one wild and bumpy ride this last year as Americans from coast to coast have seen the value of their homes plummet.
Right now, we all have our fingers crossed that the $787 billion federal stimulus package, which was signed into law in February, marks the start of the road back to economic recovery. “I heard one TV commentator say that it’s not only fingers crossed, but also arms, legs, and toes,” says Art Livesey, a real estate broker with Coldwell Banker Currier and Lazier in Middletown, and president of the Orange County Association of Realtors.
A bit of levity, yes. But despite the nationwide fear and trembling, there is some hopeful news regarding the real estate scene here in the Hudson Valley. Mortgage rates are hitting lows not seen in more than 10 years — and if you’re a first-time home buyer, well, this just might be the golden age you’ve been dreaming about. We spoke with a sampling of pros throughout the region to get their take on what home buyers and sellers might be wise to do — or not do — this year. Here’s what they have to say.
“Yes, national unemployment is up and the real estate market is down. But remember that the Hudson Valley does not necessarily have the same statistics as the rest of the country,” says Adele Arnell George, principal broker at Northern Dutchess Realty in Rhinebeck.
“States like California and Florida have been particularly hard-hit with sales drops and foreclosures compared to our region,” she notes. According to the New York State Banking Department, there were 50,032 properties statewide with foreclosure filings in 2008 — ranking New York 35th in foreclosures among the 50 states.
In Dutchess, home prices dipped about 12 percent, and purchase offers are off 20 or 30 percent in the past year, she says. “But there are still pockets of fairly steady prices in places like Rhinebeck. Prices have gone down, but they haven’t plummeted,” George adds.
And even though there’s valid cause for economic concern — nearly everyone in the Valley has been directly or indirectly affected by job insecurity or loss, the housing tumult, or other aspects of the financial upheaval — real estate pros agree on one thing: The market moves in cycles.
“This has been a particularly difficult period, but you’ve just got to ride it out,” says Steve Domber, president and principal broker at Prudential Serls Prime Properties in Hopewell Junction.
“The news of the day is not very upbeat, to say the least,” agrees Sal Prividera, Jr., director of communications and marketing for the New York State Association of Realtors. NYSAR reports that statewide sales by realtors of existing single-family homes were down 16.2 percent last year compared with 2007; they’ve dipped a whopping 23 percent from 2006.
When it comes to prices, NYSAR says the statewide median selling price of a home last year was down 8.5 percent, to $215,000, compared with the $235,000 median in 2007.
The numbers tell the story: Those golden years of the housing boom are definitely over, at least for now.
“2005 was actually the best year ever for real estate in New York. The largest number of existing single-family homes were sold that year since we’ve been tracking records,” Prividera explains. “Back then, in much of the Hudson Valley there was low inventory, a greater number of buyers, and the economy was plugging along very well. We saw this in 2005, and also in ’04 and ’06 — low inventory led to bidding wars that drove prices up tremendously.”
But it was bound to change, he says. “It’s simple economics with nearly any commodity, including housing. Over time, demand relaxes and prices soften. If you take that period from about 2005 to 2006 — in New York State and across the country — it was an unsustainable, unrealistic, once-in-a-lifetime market.”
Maybe that’s the silver lining in this sobering new real estate reality: Now that the bubble has burst, experts are seeing a return to sound, sustainable basics when it comes to the world of real estate.
But adjusting to this new reality may not be easy for homeowners. “It’s a very hard thing to make the transition from looking at your home as the biggest investment and piece of equity you have — where you thought you could turn it over and make a ton of money — to ‘Maybe it’s worth what I paid for it,’ ” says George.
“The consumer of tomorrow will be much different than we’ve seen recently,” agrees Livesey of Orange County. “People will be looking more for value. They may not have the big jobs and bonuses and perks that many buyers used to have.
“Here in Orange County, for example, affordability is coming back,” he continues. “Last year, people were hard-pressed to find a home in the $200,000-or-less range. Now we have an abundance of them. Couple that with lower interest rates, and hopefully buyers will get even more incentives from the new government stimulus package.”
Livesey also points out that smaller houses seem to be selling more frequently than larger ones, and that the lower gas prices and quality mass transit are two factors that continue to attract New York City commuters to Orange County. “The market has really slowed down. This is truly the time to buy.”
“For some people, it’s absolutely the right time to buy,” agrees Prividera. “Prices are soft, mortgage rates are at historic lows, and inventory is available, so there are some good choices out there.”
Adds Domber of Prudential Serls: “There’s a lot of real estate panic among the public, but buyers who can get a mortgage aren’t the ones panicking. They’re actually pretty happy right now, especially qualified first-time buyers,” since it’s now a hot market for those in purchasing mode.
“And not to diminish the U.S. economic crisis,” Domber continues, “but even if nationwide unemployment goes up to 10 percent, it still means 90 percent of Americans are employed. And people will always be buying homes.”
When it comes to shopping for a first home, most experts suggest making practicality paramount. “We urge first-time buyers today not to look for the home of your dreams that you’ll be in for the next 20 years,” Prividera adds. “Starter homes are just fine. What’s important is to get into a home that you can afford today — and tomorrow.”
Chuck Bartolo, principal broker at Beach & Bartolo Realtors in Spencertown, says he’s seen some positive changes in the regional real estate market. “For the first time in a long time, more families who have lived their whole lives in the Valley — here in Columbia County, for instance — and who historically were priced out of the market by all the second-home buyers who poured in, are now finding that they and their children can get into the market and buy locally, too.”
And many of those second-home buyers are also rethinking their options, Bartolo adds. “They’re seriously entertaining the idea of not just making Columbia County a second home, but their primary residence. They’re considering commuting to Albany, or to Manhattan on Metro-North or Amtrak, or finding a new way to earn a living: getting into a business, doing consulting or telecommuting. There’s been a shift in people’s attitudes lately.”
Joan Lonergan, owner and principal broker of Coldwell Banker Village Green Realty in Windham, notes that home buyers in Greene County are also encountering bargains. “People are shopping for value, and there are some undiscovered great deals,” she says. “People are thinking ‘Oh my gosh, I can get a great house and it’s really not that far to travel.’ There’s a fairly steady second-home market.” Lonergan also handles sales in Ulster County and says the market there is still pretty good, too. “There has been less activity in 2008 than in 2007,” she says. “But people like the convenience of places like New Paltz and that area. With the college there’s always something to do, plus the natural beauty and the outdoors is a big draw.”
In fact, Lonergan feels that, throughout the region, the housing market is not as badly off as it might appear. “People have been bombarded with the idea that things everywhere regarding real estate are a disaster. If you watch CNN or read the newspapers, you hear about some incredible drops in real estate values and prices. But it’s not happening uniformly everywhere. The number of sales of single-family homes has been down recently, but the numbers we’re seeing in the region for the end of 2008 show that sale prices only went down about four percent. That’s a drop, sure, but not an extreme drop compared to other places in the country, like Sacramento, for example. It’s pretty solid for the most part.
“It’s likely there will be yet another drop,” she continues. “But the good news is that by the time you hit bottom price-wise, you don’t even know it. That’s why I’m seeing a lot of pent-up buyer activity. People are circling, watching, waiting for the right time to buy. Eventually the dam will burst and people will say, ‘Now’s the time.’ People always have a dream of wanting a home, and they’ll only put that dream off for so long. Maybe in the past they wanted a $500,000 home, and now they’ll buy one for $300,000, but they still want a home.”
Lonergan is also optimistic about the government response to the housing crisis. President Obama’s federal stimulus package allows for qualified first-time home buyers to receive an $8,000 tax credit, which does not have to be repaid. “Some aspects of the new stimulus bill, like the tax credit for purchasing a home, will really help buyers, especially first-time buyers. So maybe in the long run, people will find out that this period of economic adjustment isn’t such a bad thing after all.”
So first-time buyers have reasons to be upbeat. But for others, the best advice might be to sit tight for awhile, experts say. “If you’re looking to trade up, in most cases you’re probably not going to get today what you might have gotten in 2005 for your home,” Prividera says.
But, he points out, a recent NYSAR study found that the average homeowner in New York State has been in his or her dwelling for seven years. “If you look at the statistics, over the long run, most buyers will enjoy the benefit of price appreciation if they hold onto their homes long enough.”
But what if you must sell now? “The key is to price your home competitively, reasonably,” Prividera says. Ideally, you should try to close on both sales simultaneously: “If you can coordinate both sales at the same time, the advantage there is that you’re not paying two mortgages.” For those who plan to move to a new home within the area and have a temporary place to stay, selling your current house first is a smart move. But tread carefully if you’ve landed your dream home but haven’t yet found a buyer for your current place. “If you find a home you want to purchase, do so with a contingency based on the sale of your own house,” advises Prividera.
With the dizzying amount of information about the economy bombarding us every day, it’s certainly a challenge to keep a clear head when it comes to real estate. Several experts we spoke to summarized two key points to help make it easier:
Prividera echoes Adele Arnell George’s observation that the regional housing market is the most important to track, more so than the national scene. “I’d encourage anyone considering buying a home to focus on the condition of the market where they want to live,” he says.
“What’s happening in California, Arizona, Iowa — pick a state — or whatever is being reported on the news as the national housing market, doesn’t always matter as it applies to the Hudson Valley. What conditions do matter are in the community where you want to buy that home.
“You wouldn’t turn on the Weather Channel and expect a forecast: ‘The United States will be sunny and 76 today.’ So to turn on the TV and hear ‘The national housing market is plummeting’ — that’s not accurate for everyone. The question to ask is: ‘How does that relate to my local community?’ ”
“Certainly, one of the core American dreams is owning a home of your own,” Prividera says. “And for many of us, it’s the largest investment we’ll ever make. If you’re buying a home to have a roof over your head, a place to call your own, to raise your children, then you won’t be so focused on thinking, ‘A year from now, can I flip this and make $100,000?’ — because your home has a value to you well beyond the monetary. You’ll most likely be able to ride out the current real estate ups and downs.”
Chuck Bartolo adds that it might help, too, to ponder deeper lessons in the current economic meltdown.
“Maybe good things will actually come of all this,” he says. “As a country and as individuals, we’re being forced these days to rethink choices we made in the past; perhaps we’re not going to make the same ones in the future.
“Perhaps we were on the wrong track for too long and didn’t realize it until we had this big turnaround in our economy. It’s a national wake-up call.”
With the nation’s financial meltdown, “we’re definitely back to basics involving lending,” says Arnold Restivo, regional lending manager at Tuthill Finance in Fishkill. Part of what caused the housing collapse, he notes, was that — for various reasons — people were allowed to borrow more money than they could afford. “Eventually they couldn’t make their mortgage payments, and it became a negative spiral,” he says.
“Today’s mortgage market is more like the ones we had in the past, like in the ’90s. It’s based again on ‘the three Cs’ of lending: character — your credit and willingness to make the payments; capacity — your income, ability to pay; and third, your collateral,” says Restivo, who also offers consumer counseling services and education programs through the Cornell Cooperative Extension.
He points out that the days of zero-percent down are gone; now, you need to put a minimum of 3.5 percent down on a home. And of course, the larger the down payment, the better your loan terms will be. “We’re back to the basics of lending,” he says. “There’s no big magic out there.”
But mortgage bargains do abound for buyers in today’s market, especially if your credit is sterling, Restivo says. “But you still have to do your homework. Get a loan commitment before you start shopping; make sure everything is in order ahead of time. You’ll need to have all your ducks in a row. In this market you’re going to need to have reasonable credit: a 620 mortgage credit score or better. (During the bubble, less than 500 would have sufficed. Then, a 560 credit score could have gotten you 100 percent financing.) And you must be able to demonstrate your willingness and ability to make those mortgage payments.”
To improve your credit rating, Restivo suggests keeping credit-card balances at one-half or less of your spending limit. “For example, if you have a card with a $10,000 limit, you want to avoid having more than a $5,000 balance on it.” Also, pay your bills on time and don’t pay off a large percentage of revolving debt in one hit.
And if you’ve got an existing mortgage at a rate that’s relatively high, taking action now might be a smart move. “This is the perfect time for refinancing,” says Adele Arnell George. “In fact, some lenders are facing delays in writing new mortgages for qualified buyers because of the piles of re-fi applications that are sitting on their desks.”
Along with real-estate professionals, the state can be another resource if you need mortgage advice or assistance. The State of New York Mortgage Agency (SONYMA) offers six mortgage plans that can help many residents purchase a home, including first-time buyers (some programs are also available to non-first-time purchasers), veterans, and others. Go to www.nyhomes.org or call their hotline at 800-382-4663.
Some experts predict a new wave of U.S. foreclosures starting this month, as hundreds of thousands of adjustable-rate mortgage (ARM) loans reset across the country. If you’re at risk of foreclosure, Arnold Restivo of Tuthill Finance suggests taking action before the situation turns dire and can’t be resolved without property loss. Speak with your lender, and consider getting advice from other experts, too.
In February, President Obama announced a major plan to help up to nine million American homeowners either avoid foreclosure or refinance their current mortgages. Locally, Hudson Valley Foreclosure Prevention Services (HVFPS), a four-county initiative launched late last year, assists residents of Dutchess, Ulster, Orange, and Sullivan counties who are at risk of losing their homes. Mary Linge, the director of home ownership and education, says that the program fields an average of 17 calls a day from worried homeowners. “The first thing we do is make an appointment with them for a one-on-one consultation,” she says. Homeowners bring their income statements and other documents and fill out a detailed questionnaire “so that we can find out what caused them to be in default in the first place,” she says. “Then we can start to come up with a solution. Maybe they need to earn more income, maybe they need to find ways to cut back on other expenses.”
Linge estimates that about one-third of the callers have lost jobs or another major source of income, but many have just gotten into trouble for other reasons. “Maybe their other household expenses have suddenly gone up,” she says. “I know that, with the very cold winter we’ve had, many people were faced with very high heating bills that caused problems with their finances.” After figuring out an action plan, HVFPS often negotiates directly with the banks and lender on behalf of their clients. “We talk with them and try to get them to lower their interest rates,” says Linge. “Or perhaps we can talk them into converting an adjustable-rate mortgage into a fixed-rate mortgage. There are lots of things that we can do.”
The Empire State’s foreclosure woes are not nearly as bad as those of the hardest hit states — as of late last year, Nevada, California, Arizona, and Florida all had foreclosure rates five to 10 times higher than those of New York, according to the Office of the State Comptroller. Nevertheless, foreclosures do remain a significant problem. In the mid-Hudson region, foreclosures increased 350 percent from 2006 to 2008. The worst offender? Orange County, which last year had more foreclosures than any other county in the state. Why is that? “Lots of people are asking that question, but I don’t have a good answer yet,” says Linge, who notes that 46 percent of the calls her office receives stem from Orange residents (followed by 38 percent from residents of Dutchess County).
Linge also cautions homeowners to beware of the multitude of foreclosure rescue scams currently floating around. A scammer may pretend to be a “specialist” (and then charge outrageous fees for making a few phone calls), may try to get you to sign over the deed to your house, or use a variety of other tricks. To be sure you are dealing with a qualified housing counselor, visit the Department of Housing and Urban Development’s Web site at www.hud.gov or call 1-877-HUD-1515. The Poughkeepsie-based HVFPS can be reached at 845-454-5176 or by visiting www.hudsonriverhousing.org.
Median Housing Prices
Click on any image to see the median house prices for those counties in 2008
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