Considering a mortgage refinance? 2021 may be the time to get one By Liz Alterman Sponsored by…
By Sheryl Nance-Nash
It’s a new year, a new decade, and you’re ready to pursue your dream of owning a home. Is it a good time to do so?
Interest rates are still at historic lows. Mortgage buyer Freddie Mac said Thursday the average rate for a 30-year fixed-rate mortgage dropped to 3.64%; it was 4.45% a year ago. But real estate is hyper local. What are the expectations for the 2020 Long Island housing market and, in particular, for first-time buyers?
If your goal is to become a homeowner this year, here’s what you need to know.
Assess the market
Low interest rates mean first-time homebuyers can afford a higher-priced house than they might have been able to afford a few years ago.
“In some instances, with the current low rates, it is less expensive to own than to rent,” said Gail Carillo, associate broker with Coldwell Banker Residential Brokerage in Ronkonkoma.
But competition at the low end of the market — homes priced under $600,000 — is stiff, said Dan Gotlieb, founder of Digs Realty in Manhattan. “We see strong demand and not enough inventory.”
Finding a place to buy at a higher price can be less of a challenge, he said. “If you’re looking for a home at the high end of the market, you are well positioned to get a deal, as these homes have been lingering and will likely continue to do so through 2020.”
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Many New York City millennials — part of a demographic that has historically waited longer than other groups to buy their first homes — are ready to leave the city, driving up demand for lower-priced starter homes on Long Island, he added.
Increased demand typically drives up prices. A house that’s a bargain today may not last on the market for long, points out Jake Lizarraga, a writer for REITS.org, a website that focuses on Real Estate Investment Trusts.
Take a good look around and decide which markets you want to consider. “Given all the revitalization efforts in towns like Patchogue and Bay Shore, where prices are affordable [with median prices under $400,000, according to Zillow and Redfin], get a diamond in the rough.”
Know, too, that some real estate professionals are starting to speculate that the market is going to “correct” — meaning prices would dip — which could motivate sellers to sell sooner rather than waiting, said Kelly Forman, a real estate salesperson with Daniel Gale Sotheby’s International Realty in Rockville Centre.
“This means that when people put their house on the market, they are serious sellers,” she said. “This could also increase inventory, giving buyers a bit more choice.”
Beware of property taxes
Understand that the amount of state and local taxes you can deduct on your federal tax return is capped at $10,000, a result of changes in the tax law that have been imposed since 2018, advised Bryan Fedner, co-founder of StayMarquis, a luxury rental management company in Manhattan.
The change has increased demand for homes with lower property taxes, real estate experts said.
Some prospective buyers in Suffolk County should be aware of the so-called Peconic Bay transfer tax, which applies to sales in the towns of Riverhead, Southold, Southampton, East Hampton and Shelter Island. The tax, which adds 2% to the purchase price after certain exemptions, finances open space acquisition, historic preservation and water quality initiatives. “There is a first-time homebuyer exemption,” Fedner said. But, he added, “certain property value and income thresholds need to be met in order for first-time homebuyers to qualify for the exemption.”
Shop smart for your mortgage
“There are some out-of-the-box programs available for first-time homebuyers on Long Island,” Forman said. “Nassau and Suffolk counties offer down payment grants for some first-time buyers, and community banks like Valley Bank offer … products where qualified buyers can put down less than 20% and not have to pay for PMI,” she said. PMI — private mortgage insurance — is an added insurance policy that homeowners who make a down payment of less than 20% of their home’s purchase price are usually required to buy.
Explore your financing options. “There are still plenty of financing options and the Fannie Mae, Freddie Mac, FHA and VA loan limits have all increased, giving buyers room to increase their budget without needing to bring the higher down payment generally required on a jumbo or non-agency loan,” said Matt Hackett, a senior mortgage and finance expert with Equity Now, a direct mortgage lender in Manhattan.
By Sheryl Nance-Nash Special to Newsday