U.S. home prices are up about 10 percent right now from the same time last year, multiple national reports have shown, yet local reports have indicated that Long Island’s appreciation is just half of that — or even less.
The closely watched Case-Shiller Home Price Index most recently reported a 9.3 percent nationwide increase, while a similar measure from market analytic firm CoreLogic, released May 14, found a 10.5 percent increase.
Meanwhile, a local report from Douglas Elliman, which excludes the East End, found median home prices down 2.6 percent annually and a report from the Multiple Listing Services of Long Island, which includes Queens, showed a 4.5 percent uptick. CoreLogic’s Nassau-Suffolk home price index measured a 3.2 percent increase in prices.
So no matter how you slice it, Long Island is underperforming relative to the rest of the country. And that’s especially surprising considering the historically low supply of homes on the local market. What’s to blame?
It’s mostly New York’s foreclosure process, industry experts explained. The state employs a judicial process that, on average, takes 1,089 days from the time a lender files a complaint to the time the property is officially foreclosed, according to a recent report from RealtyTrac. That’s tops in the United States, where the overall average is 414 days.
As a result, there’s a humongous inventory of distressed homes looming in the shadows awaiting clearance to be offered for sale. Nassau and Suffolk counties have more than 24 months supply worth of distressed homes that haven’t completed the foreclosure process and entered the sales market, according to the CoreLogic report.
Consider there’s only one other market among the nation’s 25 largest that even has more than 15 months worth of supply — the Edison-New Brunswick, N.J. region has a 16-month supply of distressed homes.
So while other localities have made significant progress clearing supplies of distressed homes — especially since the massive federal mortgage settlement in February 2012 — Long Island hasn’t. Nationally, between 20 and 30 percent of all homes sold in March 2013 were in some stage of distress in many of the largest markets compared to between 30 and 40 percent a year ago. The elevated, but decreasing share of distressed sales indicates that foreclosures are clearing through the market.
“That’s how you make a housing market recover,” Jonathan Miller, president of appraisal firm Miller Samuel, said in an interview. “You move the distressed properties from weak hands to strong hands. Until that happens you can’t truly recover.”
But on Long Island, just 7.1 percent of all sales are distressed properties, and that’s actually increased year over year, from 6.3 percent, according to CoreLogic. As a result the stock of foreclosed homes on Long Island has fallen just 9.6 percent from the peak, whereas in major markets outside New York and New Jersey, the foreclosure stock has decreased from 14.2 percent to 78.3 percent from peak levels.
“It’s just not clearing on Long Island,” Molly Boesel, a CoreLogic economist, said in an interview. Those distressed properties and their owners remain in limbo, negatively impacting neighborhoods’ property values. The homes also represent a cluster of typically cheaper homes that can be used as negotiating tools in home transactions. “The distress is clearly putting downward pressure on prices,” Boesel noted.
Considering the enormous supply of delinquent loans — currently about 46,000 exist on Long Island, according to Boesel, compared to 5,000 in the area’s typical housing market — Boesel expects Long Island to lag national home price increases for some time.
“The numbers imply that it could take a few years before that’s lifted,” she said.