Subprime woes and Long Islands North Shore Real Estate Market or how I came to love St. James, Stony Brook, Setauket, Port Jefferson, Mt Sinai, Miller Place, Shoreham and Wading River.

Photograph of West Meadow Beach by author
written by
John Strozier
March 28 2007

“Everything is local”, that’s what they say. And it is true especially when it comes to national headlines. If you Google “Subprime” what you read might not match up to what’s happening in our local real estate market, meaning specifically Smithtown, St James, Stony Brook, Setauket, Port Jefferson, Mt Sinai, Miller Place, Shoreham and Wading River.

Recently I searched Google News “Subprime”, the headlines came up in this order; “Subprime mortgage meltdown” Consumer Reports.org, “Feds sees Subprime market woes for one to two years” MarketWatch.com, “Sector Snap: Homebuilders Tumble” Houston Chronicle, “Subprime Foreclosures May Hit 2.4 Million, Group Tells Congress” Bloomberg.com . You get the idea, “gloom and doom” the party crashing Cassandra’s. There’ll always be “gloom and doom” but for some not everyone.

Much of the Subprime woes are taking place in speculative markets. For example in many areas in the west, developers like Sun City, have built something out of nothing but sand and tumble weeds. Outside of Phoenix to the west, north, east, and south developers have built huge communities, in barren desert, some specializing in the fifty and over crowd, the “snowbirds”. Throughout California large developments have been built an hour or two outside of Los Angeles, San Francisco, and San Diego. The local amenities for most of these areas are large box stores, seven elevens, and fast food chains. The age of many of these new communities, towns and villages is under 9 years.

Too often these communities have the personality of a strip mall and were built in hast. When these developments go south they can have a domino effect, which affect other near by developments and newly built communities. Many of these buyers were offered and accepted adjustable rate mortgages, which they bought at the height of the market. Now the homes are worth less than their purchased price. The mortgage payment has gone up and they cannot pay thier mortagage or sell the house at the price they bought it. They are distressed sellers.

If you live in a community where five to ten percent or more of the population has these problems, you will start to see “The Subprime woes”. One foreclosure sale can lead to others, which means more homes on the market which must sell, prices go down, people move, which may result in more renters living in a community than homeowners, which leads to less pride of ownership, which leads to less desirable neighborhoods, which leads to lower home prices and more of the same… bla, bla, bla. The vortex like a black hole sucks everything into it as real estate prices go south dramatically and the “Subprime woes” become a hard reality.

Subprime woes can also occur in cities and rural areas whose populations are employed by one industry, which suffer a change in market conditions like the Detroit Michigan area. Subprime woes can occur when speculators buy homes, condos or into gated community using creative financing thinking the sky is the limit in places like Florida or Las Vegas. Developers, speculators, and over enthusiastic buyers go bust buying on leveraged money whose rates change rapidly leaving them unable to make monthly payments singing the subprime blues.

I see none of these scenarios in play in Smithtown, St James, Stony Brook, Setauket, Port Jefferson, Mt Sinai, Miller Place and the Shoreham-Wading River area. The largest developments in the area are over ten years old and the average is much older. We have amazing towns and communities, which are more then two hundred years old with rich histories going back to the revolutionary war and further to the Dutch landing in Manhattan Island around 1614. Port Jefferson has been the home of B.T. Barnum, famous ship builders, and a port of entry for the United States of America. Stony Brook University is only growing becoming more prestigious and recognized internationally. The Long Island sound is unique to the world in beauty and activities. Our wineries, Brookhaven Labs, Symbol Technologies, new Stony Brook University research facilities at Flowerfield Gyrodyne, and much more leave us rich in potential for growth and vitality.

The north shore is special for a multitude of reasons. Our local population is relatively affluent and savvy, our homebuyers are usually local or from other parts of Long Island; the south shore, Nassau County, Queens, Brooklyn and the city. Our largest employer Stony Brook University is expanding. Suffolk County is dedicated to preserving more open space leaving existing homes a rarer commodity. Manhattan is Manhattan.

Our local amenities are superb. Between our libraries, schools, beaches, parks, Long Island Sound, Stony Brook University, and our proximity to New York City we have more to offer then most communities in the continental United States. There are very few tracks of land, which are developable. New York City is only getting closer as time passes which has its pros and cons but the constant is over time property values in this area only increase. New York City will last throughout the twenty first century and beyond. The local real estate market may not show the gains it has shown in the past and it may loose some value in the short term but you will not see the worst-case scenarios, which will probably occur in other parts of the country.

Yes people have taken losses in the area. Some homes in the areas, which sold in late 2004 and early 2005 and which have resold recently, within the past year, have taken negative gains. Some homes in the area will depreciate more than others. The local real estate market has been riding fairly even recently, there has not been any big price downturn compared to some places in the country, and there has not been a rash of foreclosures. Interest rates have not moved much, which has helped home prices stay stable. I see a good future in our area over the long term. The doom and gloom of the “Subprime woes” will affect specific areas and regions in our country but I believe they will have a minimal effect on Long Islands North Shore.

Who knows what tomarrow will bring? I can not predict the future. Some people say the sky is falling. I think it matters where you are standing.

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Thank you,
John Strozier