Long Island home prices hit new highs in third quarter as mortgage rates rose

Will Long Island’s housing market crack under the pressure of rising mortgage rates? It hasn’t so far, according to new data from real estate brokerage Douglas Elliman and appraisal firm Miller Samuel. 

The median price of a Long Island home reached a record $620,000 during the period from July to September, according to the report, which counts sales in the Hamptons and on the North Fork separately. 

While that was 6% higher than the median a year ago, it reflected much slower price appreciation than the 15.5% year-over-year growth recorded in 2021.  

Single-family houses sold for a median price of $635,000, while the median condo closed at $418,000.

 The continued appreciation in home values has come even as the average mortgage rate for a 30-year fixed loan hit 7.08% on Thursday, which is more than double where it stood last year. It averaged 5.6% in the third quarter, according to mortgage giant Freddie Mac. Higher interest costs mean Long Island homebuyers can expect to pay hundreds more each month for their mortgage.    

Prices are “rising but not rising at the same intensity we’ve seen,” said Jonathan Miller, CEO of Miller Samuel. “The rate of price growth is slowing. That’s the impact that we’re seeing from higher interest rates.”

Some of the hallmarks of the pandemic-era real estate boom continued through the third quarter. Sales closed 41 days after they were first listed, which was the fastest pace in a quarter since the real estate firms began tracking the measure two decades ago. About 57% of homes sold for above asking price, near the record percentage of 59% set in the second quarter.

In the Hamptons and on the North Fork, prices rose even faster. The median sale in the Hamptons in the third quarter went for $1.6 million, which was 23.1% higher than in the same period last year. The North Fork median sale rose 22.4% to $979,500.

Miller said the dampening effect of higher rates is more evident in the number of homes sold. There were 7,766 sales in the third quarter, or 15.8% fewer than in the year-ago period on Long Island, excluding the East End. That represented the fourth consecutive quarter in which home sales have fallen. Still, the number of sales was close to the third-quarter average over the past 10 years.

One caveat is that the Sept. 8 cyberattack on Suffolk County's computer systems might have affected data for the last few weeks of the quarter. Miller said he feels confident the report is a fair representation of the market but acknowledged some deals that were delayed by the incident might not appear until the fourth quarter. 

What has surprised Miller is that higher mortgage rates, which have  pushed some buyers out of the market by making it more expensive to purchase a home, have not led to any increase in the number of homes for sale. If some potential buyers drop out, homes should stay on the market longer and supply should increase. But that didn’t happen in the third quarter.

There were 6,241 listings at the end of September on Long Island, excluding the East End, which was 5.7% fewer than at that point a year earlier. That is about half the number of homes for sale in the third quarter of 2019, before the pandemic sent home values soaring.

“What is not going according to a typical market pivot, when an external factor like interest rates is introduced, is that listing inventory is not mushrooming,” Miller said.

Ann Conroy, CEO of Douglas Elliman Long Island, said fast-rising interest rates and fears of a future recession have led some homeowners to hold off on plans to sell.

“Everyone is at a wait-and-see moment,” Conroy said. “They’re reluctant to put their house on the market for two reasons. They probably have a low interest rate [on their current mortgage] and there’s such tight inventory … they don’t really know where they’re going and what they’re going to buy.”

Prices could be slow to come down, particularly as the Island continues to have a shortage of available homes for sale, Miller said.

“Prices are sticky on the downside,” he said. “Only sellers that have to sell will sell. Sellers who don’t get their price or are uncomfortable about becoming buyers at 6%-plus mortgage rates will wait.”

Amy Girimonti, a real estate broker at Prime Properties Long Island in Huntington, said the state of negotiations between buyers and sellers is heavily dependent on a home's condition and list price. She has seen sellers drop their prices if a home sits on the market for a few weeks but also recently represented a buyer who was competing for a home in East Northport that had eight offers. 

"It's a very tricky market right now," she said. 

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.