The following appears in the September 18-24, 2015 issue of the Long Island Business News:

The Case-Shiller Home Price Index released this month reveals that close to half of single family homes in New York’s metropolitan region have been losing value.

This should not come as a surprise to Long Islanders. Since the end of the Great Recession, with the exception of high-rent districts, most real estate sectors — particularly starter homes for young families—have not been doing well and have not recovered from the 2008 crash.

In 2014, values on Long Island homes edged up less than 1 percent. This anemic result included a 6 percent gain in the highest-end homes in Nassau and western Suffolk County.

Home values in working class areas have been going nowhere for several reasons:

First and foremost: high property taxes. In my neighborhood, New Hyde Park, a starter house, which is often a post-World War II Cape Cod that has not been dormered or expanded, goes for $500,000 and its tax levy is around $10,000 annually.

A potential buyer making the area median annual income of $107,000, who hopes to take on a $400,000 mortgage at 3.875 percent, will have to make a monthly payment of $1,432. Add to that $400 a month for home and auto insurance and $500 for utility and car payments and the annual expenses before property taxes is $27,984. That’s a big number but doable if the buyer is frugal.

But when the taxes are factored in, the annual payout leaps to $37,984—a tough nut to crack when supporting a family on a $100,000 a year gross income. As a result, working class buyers are not willing to pay top dollar for houses and sellers are forced to drop prices.

Another reason why homes are not increasing in value is changing buyer habits. During the frenzy buying years before the 2008 crash, many people paid big numbers for houses even if they needed extensive improvements. Nowadays, if a house is not in “move-in” condition, shoppers will discount their offer. In other words, if the market value of a home is $500,000 and a buyer estimates it needs $100,000 in repairs, the bid for the home could drop to $400,000.

Finally, home prices are declining in areas where the commute to New York City is perceived to be too long. Back in the 1950s, couples moved to eastern Long Island because they could find affordable housing. The trade-off, however, was enduring commutes to the work place. It was not unusual for a commuter to get up each morning at 4:30 a.m., drive to a L.I.R.R. station, catch a train to Penn Station, then take a subway to the office and hope to be in by 9:00 a.m. The return trip would not get the commuter home until nearly 8 p.m.—in time to get a bite to eat and to get ready for bed.

Many people under 35 are not interested in long commutes.

They want to get to work in under half an hour. They are not willing to sacrifice leisure time to own a sizable and affordable house. Instead they’d rather be squashed in a small apartment close to their place of work. (Many young job applicants I’ve interviewed have left my office in a state of shock after I’d described my daily high school commute in the 1960s which entailed taking two city buses an hour and 15 minutes each way.)

The aversion to commuting plus the decline in local working class jobs helps explain why some communities in eastern Long Island have rundown homes that are hard to sell and are slowly turning into ghost towns.

High taxes, a shrinking job base and the exodus of young people are impairing property values. And if the insouciant political class doesn’t wake up and address the crisis, Long Island will eventually have only two classes—the wealthy and their servants.

This entry was posted on September 24, 2015 at 7:11 pm and is filed under Articles/Essays/Op-Ed. You can subscribe via RSS 2.0 feed to this post's comments. You can skip to the end and leave a response. Pinging is currently not allowed.