November 09, 2012
Storms hit already shaky real estate market
by MAURA MCDERMOTT with JOE RYAN
Sandy and last week’s nor’easter have set back the troubled Long Island housing market.
The storms’ one-two punch has buyers demanding discounts on damaged homes, sellers scrambling to make repairs, and displaced homeowners seeking short-term shelter in a tight rental market.
Mortgage lenders, meanwhile, have delayed closings until homes can be reinspected. And attendance will be sparse at open houses this weekend. “I just don’t see people driving around looking for houses right now — they don’t even have gas,” said Dottie Herman, chief executive of the brokerage Prudential Douglas Elliman in Manhattan.
The storms’ devastation comes as Long Island’s real estate market was already struggling to emerge from a downturn. Some of the effects, such as potentially higher insurance costs, could weigh on coastal home prices for years.
The pace of home sales is likely to slacken weeks before the annual winter slowdown, which typically does not begin until Thanksgiving, Herman said.
In the short term, buyers of damaged homes will insist that sellers knock the price down by the full cost of reconstruction, plus an additional 5 percent to 10 percent of the repair costs to make up for the hassle, said Robert Simons, a professor of real estate and urban planning at Cleveland State University. Longer term, if a home’s insurance costs rise by, say, $1,000 a year, its sale price could drop by roughly $10,000, as buyers seek a discount to make up for the higher insurance costs, he said.
Furthermore, Simons said, research on the aftermath of major storms suggests that homes ravaged by Sandy could suffer a roughly 5 percent “stigma discount” off the price they would otherwise fetch, since buyers will fear future storms could cause further damage.
Gov. Andrew M. Cuomo, for one, doubts Sandy will be the last devastating storm to hit the region. “Anyone who says there is not a dramatic change in weather patterns, I think is denying reality,” Cuomo said at a news conference the day after Sandy made landfall.
Prices would have to adjust if large storms hit more often, said Chris Jones, vice president for research at the Regional Plan Association, a not-for-profit in Manhattan: “The problem is that prices have been based on the idea that a storm like Sandy comes along once every 100 years.”
Even before Sandy hit, Long Island home prices were stuck in neutral. In the third quarter, the median Long Island home price of $365,000 was unchanged from a year earlier, according to appraiser Miller Samuel and the brokerage Prudential Douglas Elliman. The median home price was also flat in the spring, compared with a year before. Those numbers do not include East End sales, which fell year-over-year in the last two quarters.
Bob and Sophie Suppan snagged a 27 percent price break on the three-bedroom Amityville home they bought last week, but they are hardly celebrating. They had expected to pay $410,000, but after Sandy caused extensive flooding in the one-story home, the sellers agreed to drop the price to $300,000. The discount will pay for workers to tear out damaged walls, remove mold and replace the flooded kitchen and bathrooms, said their real estate agent, Lisa Strollo of Century 21 Prevete Bastone in Massapequa.
Until the work is complete, the Suppans are living with their two dogs in a Farmingdale hotel, since they recently sold their Amity Harbor home.
“It’s been horrible, I don’t know another word to describe it,” said Sophie Suppan, 74, a retired secretary whose 79-year-old husband retired as owner of a pump and motor company.
Sellers are also feeling the impact of the storm. Peter Kopher has been trying to sell his Seaford house barge — a four-level home designed to float — for about a year. Originally advertised for $129,900, he has dropped the price to $125,000, he said. Now that Sandy has blown the home completely out of the water, he expects the price to fall further, although he said the structure can be repaired.
“It’s an awesome way of life,” he said of the home, where he and his wife enjoyed watching from their bedroom as a visiting seal chased fish in the water below.
Contemplating early retirement from his job as a stagehand, he said he intends to move upstate.
“I’ve had enough of the water for a while,” Kopher said.
Storm damage is not the only factor that could hurt the housing market. Already-skittish lenders are likely to further tighten credit standards for homes in flood-prone areas, said Jonathan Miller, chief executive of Miller Samuel.
That tightening could cause working-class families to be priced out of some waterfront neighborhoods that are now affordable, he said. If only affluent buyers can meet stricter lending standards and afford pricier insurance, “that could begin the transition to higher-end properties” in those areas, Miller said.
Prices for homes unscathed by the storm will likely remain steady, as long as insurance costs don’t rise, Simons said.
Local brokers agreed. “For the next selling season, I don’t think it’s going to make that much of a difference overall,” said Andy Yakubovsky, manager of Century 21 Prevete Bastone in Massapequa.
However, he added, damaged coastal homes will need to be protected from future storms. “If they don’t change the codes to raise the houses, a lot less people are going to be interested in buying down on the water,” he said.
Even homeowners who are not on the water discovered they are vulnerable to flooding. When the surge slammed the South Shore, it forced torrents of water into storm sewers. Homeowners living blocks away from the water in communities including Wantagh, Massapequa and Merrick got several feet of water in their basements.
“Some of the waterfront homes didn’t even flood because of the way they were built,” Nassau County Legis. Dave Denenberg (D-Merrick) said. “But the ones a few blocks inland did — particularly if they were in a low-lying section of the street.”
Many of those residents found to their surprise that their homeowner policies will not cover damage inflicted by the storm surge. “Unless you’re right on the water you might not have flood insurance,” Herman said.
Even those whose homes were not damaged have encountered hassles.
Stephen Humenesky found a buyer for his Levittown home in August, and the closing was set for the day Sandy hit. The storm caused no damage, he said. Even so, the closing was delayed twice that week. A moving truck arrived three days after the storm to take his belongings to Texas.
Not wanting to leave the home unoccupied, Humenesky spent his last night there in a sleeping bag, accompanied by his golden retriever, Sarge. The closing finally took place the next day.
“I had one folding chair, a radio and a small patio table but we made it through the night, it wasn’t the worst thing in the world,” he said.
In addition to its impact on the for-sale market, Sandy also is driving up demand for rental properties on Long Island. The Long Island Power Authority estimates the storm destroyed or severely damaged more than 100,000 homes and businesses on Long Island and the Rockaway peninsula. Many of those homeowners are phoning brokers in a frantic bid to rent temporary housing while they rebuild.
The onslaught of would-be renters hit an already-tight market. Apartment buildings on Long Island had a vacancy rate of 3.3 percent this summer, one of the lower rates in the nation, according to a third-quarter report by Carrollton, Texas-based RealPage Inc., which tracks apartment trends.
Meg Smith, who owns a brokerage in Bay Shore, said her agents have been asking owners of vacant homes to allow short-term renters, and even urging “snowbirds” to depart early for Florida so they can rent out their homes.
Even so, she said, there are not enough homes to go around.
“They’re asking for anything, any kind of rental,” she said. “There’s just no place to put them.”
Original Article // newsday.com
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