There are some who continue to believe that Long Island has managed to avoid the collapse that flattened other bubble housing markets. This view may be little more than wishful thinking.
Take the town of Great Neck in Nassau County. Between 2000 and 2007, home sales averaged 100 a month in Great Neck according to Trulia.com. The median price of houses sold soared from $500,000 in 2000 to $1.2 million by mid-2006. Sales held up fairly well until late 2008 when they began a sharp decline. In the fourth quarter of last year, sales averaged only 30 per month. By early 2010, home sales had really collapsed. In the first two months of this year, a total of only 20 homes were sold. By March 2010, the average price per square foot of homes sold had fallen 38% from the spring of 2008.
Despite this sharp plunge in the monthly number of home sales, sellers have been very reluctant to lower their asking price very much. That's why trulia.com now has 885 homes listed for sale in Great Neck. Adding to the problem is that Realtytrac.com shows 146 homes which have been placed in default by banks. Yet the website posts only 2 foreclosed properties actually placed on the market by the banks. Why? As they have done in other bubble areas, banks have refused to foreclose on these defaulted mortgages out of fear this would further weaken the market. Sixteen of these homes have been in default for more than a year and one for a year and a half. It's a nice deal for the occupants who are living rent-free.
The market has gotten so thin lately in Great Neck that the average listing price dropped by $60,000 during the first three weeks of March. And this is heading into the usually strong spring selling season. Does that sound like a market which is bottoming and poised for recovery?
The situation is not very different in neighboring Suffolk County. For example, home sales in Huntington plunged from 268 in 2007 to only 61 last year according to blockshopper.com. Islip sales declined from 437 in 2004 to 118 last year. The collapse in sales was the worst in Melville. At the height of the bubble, 928 homes were sold there in 2004. By 2009, only 33 homes were purchased during the entire year.
As with Great Neck, asking prices in these and other Long Island towns will have to decline substantially from current levels to entice lookers to buy. It could take several years before a real bottom is reached.