Dear Friend/Neighbor/Customer,

The Summer Real Estate season saw a very slight percentage decrease in activity, year-over-year, but aggregate sales still made new record highs. With Labor Day upon us, we are ready for an upswing in activity, which the Fall season traditionally brings. This may be the last hoorah for historically low interest rates, so now may be a good time to consider buying a home or selling your existing home.

This is Doug Hayman's September, 2005, Real Estate Newsletter Edition.

In this Issue:

• Is the Housing Bubble about to burst ?
• Should I own or should I rent ?
• Find That Perfect Dream Home
• Real Estate Services and Web Site

IS THE HOUSING BUBBLE ABOUT TO BURST ?

One cannot help hearing all the talk about a housing bubble burst, in the news these days. As we all know, we have seen a large run-up in housing prices over the last 5 years on Long Island. Have prices peaked for the short-term ? Will we see a correction in housing prices in the short-term ? If so, how much of a correction will we see ? Unfortunately, if I owned that magical Crystal Ball, and had such information at my disposal, I would be a very, very wealthy man !! However, there are some educated guesses that we can make based on history, and as such, logic that can be applied to our housing market decisions:

• Historically, over the long-term since World War II, the housing market has appreciated 5 % annually, year over year.
• On Long Island, housing has appreciated at an average rate of 12.5 % over each of the last 5 years.
• There have been many short-term housing dips year-over-year, since World War II.
• If you are looking to buy a home and sell it within a couple of years, there is some inherent risk, in that your home could theoretically be worth less at the end of this period, due to a correction occurring.
• If you are looking to buy a home and hold it for 5 or more years, you are minimizing the risk of any potential housing correction during that period, and your chances for equity gain are increased substantially.
• Like the stock market, it is extremely hard to predict peaks and valleys in the housing market, and to time your buying and selling of a home at these points. A buy-and-long-term-hold strategy invariably results in positive equity gain over the long-term.
• When a housing correction occurs, the more speculative homes (e.g., fix-me-uppers) tend to be adversely effected more by the correction, than non-speculative homes.
• Historically low interest rates provide us with much greater (and cheaper) buying power. Future interest rate increases may result in lower housing prices, but the cost of borrowing would increase as well, which would result in higher mortgage payments, which may negate (or offset) any decrease in housing prices.
• If you are looking to live in your home for many years to come, home ownership is definitely the way to go. Equity build-up, the tax advantages associated with home ownership (ability to deduct mortgage interest and property taxes), and the tangible aspect of owning your own home, are the major advantages to home ownership.