Repercussions from the last two years in real estate.

It appears that leaks in the balloon were due to flying debris from a real estate earthquake. The after-effects have spread throughout the United States. This is just the beginning.

We haven't hit the peak. Investors have overspent and the chances of getting their money back are slim. The unfettered real estate balloon caused a financial burden on individual homeowners by promoting "no money down", "interest only", "zero credit", other chancy mortgages, and overpricing, without considering the potential fallout from these policies.

The same socio-economic problems are found all over the United States, raising serious questions about the way all levels of the real estate industry are operating. What goes up must come down ... and we must mitigate the situation by facing reality now.

A major problem in the metropolitan area is that the region's real estate industry uses Manhattan as a barometer of the industry's health whereas the outer boroughs, suburbs, and upstate are truer indicators of the health of real estate and the economy.

Manhattan is like a sandwich. It has extremes: impoverished areas contrasting with luxury housing being built everywhere that developers can buy land, or demolish buildings. The middle of the sandwich is disappearing. East Harlem is being gentrified with a trimming of automobile row.

Upper and lower Manhattan's middle-income housing is being squeezed, compressed by developers and owners who buy, renovate, sometimes take over properties with an eye to eliminating the rent stabilization that would eat into their potential profits.

Where can middle-aged middle-income renters go? Their income is unlikely to rise to meet Manhattan's sky-rocketing rents. Rentals in the boroughs & suburbs are not far behind.

These people don't fall under the poverty line and cannot move into city housing. In the past this segment of the city population would have been able to look forward to retirement.

Today those "retirement" years are likely to be "slog along as usual" years as middle-income renters must continue working to pay their bills.

Low and middle-income residents and businesses are being forced out in the outer boroughs as a result of high acquisition costs.

New large-scale commercial and luxury housing development is now erasing the character of Staten Island's villages and Brooklyn's brownstone areas. The distinct characters of these neighborhoods were a drawing card.

They included mixed-use properties, small shops with merchants who supplied the locality with food, hardware and other necessities. The proprietors often lived nearby as members of the community, unlike "Big Box" commerce which draws from far away and need not feel responsive to local needs, opinion, nor consider its effect on a locality. Consider the plight of investors who paid inflated prices for suburban property. When real estate values subside with the balloon's deflation these investors will lose out.

Rockland County is an example. Home sales at all price levels have slowed down, discouraging Investors/construction. Double the number of homes are available now as there were a year ago.

Owners who bought homes at inflated prices within the last two years and wish to sell now find their properties sitting without offers.

It is easy to find a quality home visited by 40 or more potential buyers without an acceptable offer. Property taxes are high: Rockland is in the top ten of the nation's counties for highest property taxes.

Haverstraw property taxes average $10-12,000 on moderate size homes. Children's day care centers are booming in all the suburbs because the majority of young parents need two incomes to meet their expenses. Small and medium-sized businesses cannot afford the high rents or purchase prices set by developers. Extremely high cost results in high turnover among renters and businesses.

The large number of commercial for rent signs is a symptom of the state of the economy.

Mixed-use is disappearing in suburbs as well as city and unlikely to return. Developers are beginning to hit hard times. One developer In Rockland County bought about 20 acres in a good location, constructed and landscaped a large one-story building for office condos on half the land. After two years, the building is half empty. The developer is now trying to sell the undeveloped piece.

Negative effects are visible in upstate New York. Delaware County is a prime example. It is deep in a state of depression. Mixed use and small shops have been put out of business by big-box stores.

Dairy farming has shrunk to a fraction of what it was 30 years ago. Farmers can't afford the insurance and equipment they need to function. Their children look elsewhere for their futures. There is little industry.

Young people who go to college settle elsewhere because there are few jobs available for them. Young couples who are employed cannot afford to buy homes due to inflated property prices and high taxes Prices are up, taxes are high and salaries are low.

The influx of second home owners has helped to drive up property prices.

Second home owners outnumber local year-round residents in several townships, in one they are now 70% of the property owners.

The real estate industry has enormous influence on the socioeconomic health of our society. It's time for a change, a change in attitude and a change in approach.

Ethics, a sense of responsibility, and thinking ahead are good for all businesses. In real estate this kind of professionalism can change the way the small or even the largest real estate firms operate and improve the industry's image.

Brokers: how they should represent buyers and property owners? Questions for a broker to consider at this time include: How should brokers deal with "comps" in today's market? How far back should one search to set a sensible selling price that meets the client's goals? How much information and guidance should be submitted to clients?

Do you conduct or direct buyers to information on all types of mortgages; act as an advisor on buying and selling property in general rather than the specific property?

You can professionally do both. An informed, satisfied client is good for future business.

Questions to present to a buyer/ builder include: How to calculate the profit? Can you get renters at the rents needed to operate the property? (Every month that an apartment or store remains vacant lessens the profit.) Are you looking for a flip? Who will you sell to in the future?

The new goal of realty professionals should be to inform, present all the aspects, frankly admit the recent bloated prices, go on to provide sources of accurate information to help clients without pushing for decisions one way or the other.

When you dot the I's and cross the t's early in the game a transaction moves more efficiently to a successful conclusion.

Real estate professionals, from associates to brokers, to investor/ developers, are the leading edge of our economy and therefore must take full responsibility for all aspects of real estate and its ups and downs.

BY THOMAS A. LAURICELLA

INDEPENDENT R. E. CONSULTANT

METRO/ROCKLAND AREA