By Joseph Casella
In what only can be described as a feeding frenzy, buyers continue to place higher bids on home prices. Since March, asking prices on residential properties have increased dramatically. Despite a lackluster stock market, prices are up significantly from last year at this time. Supply remains low, demand high.
With this strong demand, interest rates on 15- and 30-year mortgages have been inching higher. This has not slowed buyers down. When the Fed funds-rate was lowered it affected short-term rates but long-term rates actually increased over the same period. Investors want a higher return for lending their money long term.
Although no one can predict with certainty where this market is headed, some believe it appears to be nearing a climax. Mortgage sources are reporting that the average loan that buyers are asking for is approaching $225,000, with many mortgages being closed at $300,000 and higher. Evidently buyers are more than willing to take on ever-increasing amounts of debt to achieve the dream of homeownership.
The western Queens real estate market has been on a nice, long ride virtually straight up since 1994 but it may be showing signs of peeking. A little bit of history is in order.
Following the stock market crash of October 1987 the residential real estate market continued upward until the fall of 1989. Prices then began to drift lower until they hit bottom around the middle of 1994. Prices have been increasing steadily since then.
The adjoining chart depicts the trend in residential prices from early 1988 until April of this year. It illustrates average prices of two-family homes in Astoria, Long Island City and Sunnyside. All other residential properties (1- to 4-family homes) throughout western Queens show the identical trend. Note the sharp increase in prices from 1998 until now.
What is interesting is, if someone had purchased a home at the average price in 1989, he or she would have had to wait until 1999 to obtain the same price if they were to sell. If they sold before that year they theoretically would have lost money.
Joseph Casella is a licensed real estate broker and owner of Castle Realty in Astoria. He is editor and writer of “Market Scope,” a newsletter for property owners. He can be reached at 718-707-7019.
