Long Island's real estate market generated $6 billion less in sales in 2007 than it did just two years before, costing the region millions in tax revenue, consumer spending and incomes, along with thousands of jobs, a Newsday analysis has found.

A few more than 26,000 homes were sold on Long Island in 2007, compared to more than 40,000 in 2005. Median prices, too, have fallen. As a result, 2007 sales generated $16.4 billion, compared to $22.4 billion in 2005 -- a 27 percent decline, Newsday found.

What's more, the median home price of houses currently on the market has also fallen, an indication that the declines in sales revenue probably will continue.

On Monday, federal regulators announced they had taken over Fannie Mae and Freddie Mac, government-backed companies that hold more than $5 trillion in mortgage debt.

The move is meant to shore up the "availability of mortgage finance," regulators said, and is expected to be good news for homeowners hoping to refinance existing mortgages at lower rates and, perhaps, it will help stabilize the real estate market.

Declines across Island

A Newsday review of home sales data shows that, across Long Island, 88 of 127 school districts saw declines in median home prices of actual sales from 2006 to 2007, according to Newsday's analysis of home sales data provided by New York State. Ten of them, in communities across Long Island, including Quogue, East Williston and Oyster Bay, saw price declines of more than 10 percent; two saw more than 30 percent.

Some school districts' sales volumes in dollars were halved -- or more -- over two years. Experts estimate that half of that money ultimately stays on Long Island, with the decline rippling through the local economy, leading to the potential loss of more than 20,000 jobs and nearly $5 billion in economic output.

And there's every indication that the bleeding isn't slowing. The 26,000 homes currently for sale on the Long Island Multiple Listing Service are on the market for a median price that's $40,000 less than a year ago in Suffolk County, and $50,000 less in Nassau County, statistics show. The number of closings is down 17 percent from a year ago. Newsday's analysis found it would take 19 months in Suffolk County and 15 months in Nassau County to sell all the homes on the market at the current sales pace.

"This is only the beginning," said Pearl Kamer, the chief economist with the Long Island Association, who analyzed the data further for Newsday. "This can go on for two or three years, well into 2010."

For first-time home buyers, the unsold inventory and lower median prices present an opportunity. But the falloff hits those trying to sell their homes the hardest, as profits they may have counted on have shrunk. For homeowners who are in financial trouble and need a way out, it's even tougher.

The $6-billion drop in sales volume hits residents across the region in their pocketbooks, even if they're not selling their homes, as it affects tax collections, as well as the economic well-being of every community's main street. For the first half of 2008, mortgage tax revenue in both Nassau and Suffolk dropped by 42 percent, or $94 million, compared with the same period in 2007. In Suffolk County, sales tax fell by 1 percent in the second quarter, though Nassau still saw some growth.

Many businesses suffering

Beyond government revenue, real estate agents aren't making the commissions they once made. Plumbers, electricians, contractors and landscapers lose business every time a home doesn't sell or sells for less. A wide range of service providers and retailers -- from restaurants to car dealers -- all feel the impact, experts said.

To be sure, the housing boom, while it lasted, drove the Long Island housing market and the economy on a steep, upward path. The decline so far comes off record-highs.

And Long Island isn't among the hardest hit areas of the country, which are seeing huge median price declines and sales at a standstill. But some of those states saw a decline in sales volume followed by drops in pricing, experts said.

"In South Florida, prices were rising as volume ... dropped sharply, and it was a year and a half delay before you saw the fall in prices," said Jonathan Miller, a Manhattan appraiser who also analyzes the Long Island market. "That's not uncommon."

The "unknowns" in the region's market right now, Miller said, make it much more difficult to predict where the bottom may be.

Even in the short term, the drop in sales volume affects the economy Islandwide, according to Kamer's analysis.

Kamer assumed that half of the dollars from home sales stay on the Island. Using formulas to determine how real estate losses would affect the economy, she found that Long Island's losses due to lower home sales volume total $4.8 billion in economic output, known as gross regional product. That's a 3.6 percent drop from 2005 to 2007, Kamer said.

"Major ripple effect"

It affects all industries and nearly every school district, potentially taking 22,575 jobs out of the economy, Kamer found. But the effect on real estate, a key sector of the Island's economy, is enormous.

"There's a major ripple effect for the industry," said Emmett Laffey, who heads Century 21 Laffey Associates in Greenvale.

In the first five months of 2008, the number of sales Islandwide was off by 27 percent compared with the same period of 2007, Laffey said, adding: "It's like the auto industry selling a third less cars. There's a lot less business and the pie this year is going to be a few slices short."

That means companies are trimming staff and closing offices. Others do less advertising. Re/Max of New York cut 10 offices on Long Island off its roster in recent months, said executive vice president Carolyn Weber.

Right now, the problem on Long Island is, in a word, "stagnation," said Commack real estate attorney Lita Smith-Mines. "The deals that do start seem to fall apart. I think, basically, you've got people hunkering down in everything and, for them, making long-term commitments is a scary thing."

Smith-Mines saw business drop 65 percent since 2006, so she is working on wills and other legal jobs, and has started writing for and editing a magazine called Boating Times Long Island. Another real estate attorney started bartending just to make ends meet, she said.

The ripple effect goes beyond businesses. Some of the hardest-hit school districts, according to Kamer's analysis, include Brentwood, Half Hollow Hills, Longwood, Central Islip, William Floyd and Elmont.

The districts with one-year, double-digit house price declines ranged from East Williston with a median price of $905,000 to Island Park, with a median price of $440,500.

For now, homes are still selling; but it takes longer and pricing is critical, agents said.

"Price it right, and you'll still get bidding wars, even today," said Yvonne Wilburne, with Century 21 Yve in Hewlett.

Hard times for sellers

Debbie Ballantine is hoping that's the case for her center hall colonial in East Hills. In the spring, she priced the four-bedroom home at $999,999 and hoped for a deal that would close by this month. She and her husband, Toby, can't buy in Florida until they sell here.

When they first listed the house, their real estate agent, Michelle Cohen of Century 21 Laffey, said it was "priced to sell." But it didn't. Recently, the Ballantines lowered the price to $899,000. An open house produced a lot of interest -- but so far, no buyers.

"I do think at this price, it's a better price point for people," Debbie Ballantine said. "It's a good deal, so I'm hopeful."

As the market shifts, pricing and finding comparables is more difficult, Cohen said. It helps if a home is staged well, or newly renovated, said Dorothy Herman, with Prudential Douglas Elliman Realty.

But even so, times are tough for those like Linda Imerti, who went into foreclosure this year after she tried -- but couldn't sell -- her Bellmore home. Said Imerti, 57: "It's really bad out there."

First-time buyers' market

Right now first-time home buyers are in the best spot. Said Lynn Law, of the Long Island Housing Partnership: "We have value out there that we haven't seen in probably nine years."

Erick Strong, 36, started looking for a house more than a year and a half ago. Earlier this year, Strong saw that homes that were once unaffordable were suddenly attainable.

Strong, a sorter for UPS, and his fiancee, a Nassau County social worker who asked that her name not be used, found a home in Baldwin, in excellent shape, priced initially at $450,000. They bought it for $380,000, a nearly impossible find one year ago, Strong said.

"If you look for what you want, it's definitely out there now," he said.

The growing use of short sales -- deals made to sell the house for less than the mortgage amount -- is also bringing down surrounding home values, said Beth Marten, a Baldwin-based buyer's agent who worked with Strong.

"The buyers who would be buying in the trade-up market can't unload their homes at even a reasonable price, even when they're perfectly nice homes," Marten said. "That's really damaging the marketplace."

Credit, lending a problem

Buyers, too, have their share of problems. Tight credit and lending standards makes it more difficult for some of them to secure a mortgage.

"Anyone whose credit is marginal, I'm telling them to get a credit score above 720 now," said Bob Moulton, a mortgage broker with Americana Mortgage Group in Manhasset.

While most experts applaud the tighter standards, the trend added a new layer to an already complicated housing market. In a tough economy, it's always hard to make real estate deals. Add in sellers with hefty mortgages and buyers who can't get the loans they need and the equation gets messy.

The next few months will be telling, experts said.

"It'll be very interesting to see . . . how the values hold up, with such a big inventory and market time increasing," said Laffey, the real estate broker. "My mind tells me . . . it will absolutely lead to lower prices, but it hasn't happened yet. We'll see."

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