There are many senior citizens on Long Island who are living from month to month only on their Social Security check. Real inflation of over 15 percent has caused much financial harm and mental stress to those who are struggling and barely making it. I have visited many and have firsthand experience with people going through such challenging and difficult times.
They never thought that they would have such tough times during their golden retirement years. Some never planned properly, however, and others just didn’t squirrel away, save and invest enough to enable them to enjoy themselves after they stopped working. Speaking with a multitude of homeowners, I have been told about people who have left New York state and San Francisco, Calif., for locations Down South, such as North and South Carolina, Georgia, Florida, Texas, Tennessee and other lower cost-of-living states.
The No. 1 reason that was conveyed to me was the combination of excessive real estate and state income taxes, as well as the general cost of living (food and energy that is not included in the inflation percentages). One man said his five close friends all left NYS and he was now contemplating moving to one of those locations to be near some of them or possibly near their children.
The exodus out of New York state has been occurring for years, but the pandemic really put another nail in the coffin on the affordability issue. The $1.6 trillion of student debt was another major issue for those millennials and Gen Zs, who could no longer bear the expense of staying and living on Long Island. Those fortunate enough to be able to reside in their parent’s home, or with a relative, or team up with a roommate in a rental enabled some of them at least to save enough money to at least purchase a co-op.
However, even a small home today is beyond the reach of so many, now that Jerome Powell, our Fed chairman, increased rates March 16 and is predicting another five hikes throughout 2022. The quarter-point increase caused a mortgage on a $400,000 purchase to increase approximately $200 per month and by about $20,000 over the life of the mortgage, unless prepaid earlier.
All types of construction, investment and short-term and line of credit loans have now increased as well as interest on all credit cards. This might be the beginning of a tipping point for buyers who have been desperately searching over the last 6-12 months (and losing deal after deal due to the insane competition) for their first home or move-up purchases or downsizing home. There is inventory of about 1.7 months (meaning it would take 1.7 months to sell all the available houses on the market).
Part of the problem is that many people are just staying in place, which has caused sales to decrease while prices to continue to increase in the old supply and demand economics scenario (with low supply and high demand, prices increase). According to The National Association of Home Builders, the following information from 2018 provides a somewhat accurate and consistent analysis of second home ownership:
There are approximately 7.5 million second homes, where a majority of those owners split their time between their primary and secondary homes. The state with the largest number of second home ownership was Florida with 1.1 million accounting for 14.5 percent of all second homes. South Dakota had the lowest number of second homes at about 20,000, among all 50 states.
Half the second homes can be found in nine states: Florida, California, New York, Texas, Michigan, North Carolina, Arizona, Pennsylvania and Wisconsin. These situations have created much less than normal inventory, while the demand has been increasing for the last 11 years since the bottom of the market in 2011. This will be changing as the Fed continues to raise interest rates throughout the year.
When the Covid-19 pandemic came ashore from China and Europe, unfortunately we didn’t close our borders fast enough and we all know what happened. Some 500,000 residents left New York City alone and I am quite sure, California, Chicago and other large cities lost a percentage of their populations due to the pandemic as well. I hope and pray that the next pandemic, which is bound to happen as the human race always seems to forget their past mistakes and are creatures of constantly repeating what they should know never again!
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). For a “FREE” 15 minute consultation, a value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516)647-4289 or by email: [email protected] Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.
