LI home prices dip from record highs as mortgage rates take toll

Long Island home prices in August dipped below record highs set earlier in the summer, but the number of homes on the market also declined, suggesting the market may remain in sellers' favor in the fall.

The median sale price in Nassau County last month was $700,000, which was $20,000 below the record set in June and matched in July. Still, the median was 4.5% higher than it was in August 2021, according to new data published Tuesday by OneKey MLS.  

In Suffolk, the median sale went for $565,000, or $10,000 less than the record price set in July. The median increased 6.6% compared with the previous year.

While prices continued to appreciate compared with 2021, the rate of appreciation in both counties was the lowest it has been since July 2020, when the end of the first wave of the pandemic ushered in a real estate boom. 

The median prices for sales that were in contract last month but had not yet closed were lower than the figures for closed sales. The median pending sale in Nassau last month was $660,000, or 1.5% above the same figure in August 2021. In Suffolk, the median pending sale was $535,000, or 4.5% higher than it was the year before.

"We are seeing what appears to be a slight downturn in sales price," said Jim Speer, CEO of OneKey MLS. "In both Nassau and Suffolk, it's the third straight month we've seen a bit of a decline in the contracted sales price, so that leads me to believe it's a bit more than just the seasonality."

Significantly higher mortgage rates have made purchases more expensive for Long Islanders, which has curbed sales. The average rate for a 30-year fixed mortgage was 5.22% in August, compared with 2.84% in August 2021. The average has since increased to 5.89% as of Sept. 8, according to mortgage giant Freddie Mac.

There was more bad news for rates Tuesday. Data showing the pace of inflation hasn’t slowed as much as expected is likely to push mortgage rates higher, said Odeta Kushi, deputy chief economist at First American Financial Corp., a provider of title insurance and settlement services, which publishes economic research.  

Persistently high inflation will encourage the Federal Reserve to hike its benchmark interest rate by at least three-quarters of a percentage point at its next meeting Sept. 20-21, she said. The yield on 10-year U.S. Treasury bonds, which tends to move in the same direction as mortgage rates, also hit its highest level in a month on Tuesday.

“I think we could see even higher mortgage rates, which could put more downward pressure on sales and really speed up house price deceleration as well,” Kushi said.

 High inflation and worsening affordability have already started to have a moderating effect on prices, Speer said. 

"Between the interest rates and inflation, I think it’s making buyers pause in how much they’re offering on the homes and making the sellers more realistic that they’re not going to get the higher price," Speer said.

The number of homes sold in August dropped 17.4% to 1,349 in Nassau and 8.2% to 1,645 in Suffolk compared with August 2021.

While home sales are lagging behind their pace in 2021, Speer said the transaction figures were an improvement over recent months. The number of closings in Nassau was the highest it has been since last October. 

Those sales were sufficient to deplete the number of houses on the market and keep homebuying competitive. There were 6,760 houses on the market at the end of August, which was about 7% fewer than in the previous month. The decline ended six straight months of rising inventory after listings hit an all-time low in January.

 A shortage of homes for sale has helped keep prices high and forced buyers to compete with one another. At the rate homes went into contract last month, it would take 2.2 months to sell existing inventory in Suffolk and 2.6 months in Nassau. It usually takes five to six months of supply to created more balanced negotiations between buyers and sellers.

"There wasn't enough inventory to make up for that demand," Speer said. "With inventory staying low, the demand is going to be there, which should mean the market will keep going strong and we won't see the signficant downturn that some people have spoken about."

 Jamie Gorman, a real estate agent at Charles Rutenberg Realty in Plainview, said she's noticed less urgency from buyers and sellers to jump into the market.

"For a seller right now, there's no inventory, so it would only benefit them to list now as opposed to waiting," Gorman said. "Buyers don't have as much competition, and they may end up getting a home that they couldn't have gotten a few months back."

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.