Mortgage rates force Long Islanders to choose: Buy now or postpone?

Steven Galvez realized he had spent nearly $100,000 renting in Flushing, Queens. And he was ready for a change.

"I rented for five years," said Galvez, 34, a trucker. "I'm not going to see that money."

He and his fiancee, Emily Sosa, 33, a surgical technician, decided it was time to buy their first home together. After bidding on several houses starting last April, they finally bought a house in Ronkonkoma in October.

"It was like putting food in a fish tank. All the fish went crazy. Everybody was buying everything," Galvez said of bids made last year amid lower mortgage interest rates. "There were lines outside houses."

Galvez and Sosa bid on the home on the spot, paying $630,000 — slightly below their budget of $650,000 — at a 6.7% mortgage interest rate and moving into the house in January.

"We did an offer that day, literally outside the house," Galvez added. "We filled out the paperwork."

As the spring homebuying season approaches, increasing interest rates, combined with high demand, low inventory and rising asking prices, are more often forcing Long Islanders to make a tough call: buy a house now and absorb a financial hit or stay on the sidelines and risk missing their shot at homeownership.

Although location still rules the real estate game, mortgage rates have become a more important factor in the homebuying process, industry experts say. Unlike recent years when rates were significantly lower — about half of what they are today — bidders and buyers alike now need to decide how to manage high prices and high rates, a challenge experts say compounds an already onerous process.

While low rates during the pandemic led to a surge in offers, bidders and buyers these days need to decide how to manage the dual challenges of high prices and high rates.

Buying a house before market gets worse

We did an offer that day, literally outside the house.

— Steven Galvez

Mortgage rates during the pandemic — around 3% at their lowest — helped spur a feeding frenzy among buyers that continues now, even as rates rise, local real estate experts say.

"On Long Island, there were multiple offers on every house during the low-rate environment, resulting in many buyers shut out of buying homes," said Anna Beigelman, a licensed broker associate at Exit Realty Premier. Despite today's higher rates, "multiple offers continue to come in."

Current rates — just over 7% — and low inventory are proving a perfect storm for homebuyers, impacting where they look, bid and buy. Galvez initially looked at Nassau, but chose Suffolk after interest rates and prices rose. Tired of looking toward tomorrow, he and Sosa ultimately moved to their 2,000-square-foot high ranch on nearly a third of an acre in Ronkonkoma.

"It was going up every month,'' he said. ''It felt like if I didn't get in, it would be sky high."

We held off last year. We didn't want to hold off another year.

— Marissa Fielstein

Meanwhile, Marissa Fielstein, 34, a licensed clinical social worker, and her husband, Tim Chiraz, 34, a healthcare data analyst, are in contract to close on a $389,000, two-bedroom condo in Ronkonkoma at 6.5%, after renting in Hauppauge.

"We held off last year," Fielstein said. ''We didn't want to hold off another year," she said, noting they expected high rates.

Northport residents Edwin Hopkins, 45, an engineer, and Christine Hopkins, 45, a teacher, watched both rates and prices rise.

"There was a weird phenomenon," Edwin said. "Interest rates would go up, but the housing prices would also go up."

In summer of 2022, they bid on an Eaton's Neck house only to see rates rise before their offer was accepted.

"They didn't accept it. Then the interest rate went up and they accepted it," Christine said. "We withdrew it, because it wasn't the same thing anymore."

The Hopkinses in late February bought an approximately 3,000-square-foot five-bedroom house in Northport with a pool near Crab Meadow Beach. They closed for $800,000 at a 6.875% rate — higher than they hoped and nearly twice the interest rate they got for their previous house.

"If we waited a couple of years, our kids would be older and it might not be the same situation," Edwin said. "We were looking for a place where our children would have their own room and where I could work and my wife could do work as an office. This house has all that."

Postponing buying — and selling

Some buyers and sellers are engaging in a waiting game, hoping rates decline.

"A lot of people are staying in place trying to wait for rates to go down," said Sharon Frank, 59, owner of Sharon R. Frank Real Estate LLC. "The people who would have been buying are waiting."

Ronald Feliciano, 31, a former U.S. Marine, rents in Centereach. He has been looking to buy a house in Suffolk for six months, but said high interest rates are perpetuating his wait.

"I'm ready to have something in my name," he said. "What I find is overpriced. Interest rates go into the mix. If they got lower, that would be better."

Frank said she's seeing "a boom in the rental market" as people wait for a potential rate drop. Debra Russell, a real estate salesperson in Cold Spring Harbor for Daniel Gale Sotheby's International Realty, believes buying is best, because you build equity. "If you keep renting, you'll never get ahead," she said.

Lisa Pellegrino, an agent at Douglas Elliman Real Estate, based in Merrick, said when residents see "rates climb, sometimes they can't afford it." Fearing they won't find what they want at a price they can afford, more residents are staying put, especially older generations.

"The elderly are afraid to leave," she said. "They're afraid they can't afford to go anywhere, because of what's going on with the rates."

[Would-be sellers] are staying put because they are more in love with their 2% or 3% mortgage rate than their house.

— Anna Beigelman, a licensed broker associate at Exit Realty Premier

Beigelman said amid higher rates, many would-be sellers "are staying put because they are more in love with their 2% or 3% mortgage rate than their house."

Empty nesters are often delaying selling, which is depleting inventory, Russell said.

"Some are staying longer, but usually empty nesters want to scale down and buy smaller houses," she said. "They have to put up with running a larger home, maintenance and utilities."

People choosing to stay rather than sell further shrinks the number of houses on the market, fueling a frenzy.

"Inventory is one of the bigger issues," said John Vlogianitis, a senior loan officer at Citizens Bank specializing in Long Island real estate. "People are losing out because of inventory. It's not just the rates. It's how many houses are on the market."

Houses are selling quickly, amid low inventory. Nassau houses were on the market 56 days before selling as of January, down from 66 a year ago, according to OneKey MLS. In Suffolk, it was 48 days, down from 61.

Pellegrino said she had 60 people and 17 offers, including many over asking, at a recent Merrick open house. "They go from open house to open house, making bids on homes going over asking," Pellegrino said.

"There's such limited inventory," Russell confirmed. "And there's an abundance of buyers."

Buying, selling in 2024? What to expect

James Keogh, a licensed real estate agent on the Atlantic team at Douglas Elliman Real Estate, said while some wait, many are done delaying.

"There was a long waiting game for the soft or hard landing," Keogh said. "People got tired of waiting."

The spring real estate season could bring a boost in inventory, others said. "Normally, additional properties come on the market in April, May, June," said Susan Chen, 53, a real estate broker at S.A.C. Properties, Valley Stream. "People look to sell their house when their kids get out of school."

Meanwhile, some predict rates will drop. Greg McBride, Bankrate's chief financial analyst, recently predicted average 30-year fixed mortgage rates would reach 5.75% by year's end.

"Many factors could play out between now and year-end to change those projections," according to Bankrate, citing inflation and Federal Reserve decisions.

If the rates drop a lot, there will be more competition. It will drive the price up.

— Debra Russell, a real estate salesperson in Cold Spring Harbor for Daniel Gale Sotheby's International Realty

But with declining rates and increased inventory, demand and prices could swell. "If the rates drop a lot, there will be more competition," Russell said. "It will drive the price up."

Russell recently sold a house with a mortgage about twice the 3% on their existing house, but high sales prices help defray the cost of higher rates on new purchases.

Beigelman in December sold a house listed at $950,000 for $1.06 million with 12 offers at asking price and above in one weekend.

Even if rates dip, they are likely to remain far from pandemic rock-bottom lows. "People are coming to the realization that these are our interest rates," Russell said. "And if they want to purchase, they will have to purchase with the interest rate."

Homebuyers sometimes seek revenue to defray mortgage costs. Galvez, for instance, hopes to add an accessory apartment. Meanwhile, some are considering looking beyond Long Island to find lower prices, amid high rates.

"I have been postponing this," said Lisa White, 50, a teacher in the New York City public schools looking in Nassau, Suffolk and Queens. "I'm starting to consider out of state."

Can you get a lower mortgage rate?

Although rates are higher than the recent past, buyers can do things to lower them. "There are different products," Russell said. "If you want a lower rate, you might want to take a bigger loan to achieve the lower rate."

ARMs, or adjustable-rate mortgages, can increase or lower rates. And it's possible to buy points, paying upfront while holding down rates. Vlogianitis said a point typically costs 1% of loans.

Buyers also may be able to put more money down. "They have family members helping with bigger down payments, so they don't take as much of a mortgage," Russell said.

Vlogianitis said some banks lower rates for clients who move assets into their bank.

Refinancing also can let buyers lower rates later. "If rates come down, you could refi if you stay in the house," Russell said.

Vlogianitis said many homeowners refinance or relocate within six years. "Even though you think you will be in the house for 30 years, there's a good chance you won't," he said.