Long Island home prices set records in September as sales slump continues

Home prices in Nassau and Suffolk counties reached new highs in September. But there are a dwindling number of deals happening as surging mortgage rates discourage homeowners from putting their homes on the market.

The median sale price in Nassau County last month was $735,000, or 5.2% higher than the median sale in September 2022. In Suffolk, the median rose 8.2% to $595,000 last month, according to new data from OneKey MLS.

The previous record prices, set in August, were $727,500 in Nassau and $590,000 in Suffolk. The Nassau median for August was revised downward this month by OneKey MLS, reflecting sales that weren’t included in its initial report.

A persistent shortage of homes on the market has driven up prices, said Richard Haggerty, CEO of OneKey MLS. There were 5,127 listings at the end of last month, which was 24% lower than at the close of September 2022.

“It’s strictly a product of low inventory,” Haggerty said of the record prices.

Home prices have risen even as the average long-term U.S. mortgage rate reached its highest point since December 2000 this week. The average rate for a 30-year fixed mortgage was 7.57%, according to Freddie Mac, up from 7.49% last week. Last year at this time, the average was 6.92%. As recently as January 2022, rates were about 3%.

Zahra Jafri, founder and president of Lynx Mortgage Bank in Westbury, said there hasn’t been a drop off in inquiries from potential homeowners but higher rates mean borrowers can’t afford to buy as expensive a home as they could a few years ago. She sees the slowdown in sales as tied to the scarcity of homes. Until people have a better handle on the stability of mortgage rates, they will put off making a big move.

“Rates cannot continue to be so volatile,” she said. “We need the stability for people to make decisions.”

Homeowners that bought or refinanced when rates were below 5% have little financial motivation to sell, and when they do browse homes, there’s a limited selection to buy, Haggerty said.

As a result, the number of home sales was well off the mark for a typical September. There were 2,048 closed sales last month, which marked the fewest during September since 2012. Deals were down 17% from September 2022, when mortgage rates had already begun to slow the market.

Data on deals that were in contract but had not yet closed last month show the trend has continued for the most recent sales. The number of pending sales fell about 10% in September to 1,938 compared with the same month a year ago.

The fact that prices are rising shows that there is still interest from homebuyers but there isn’t enough supply to satisfy them, Haggerty said.

“Buyers are willing to buy even with interest rates where they are,” he said. “There’s just nothing for them to buy.”

Jared Garcia, an associate broker at Weichert Realtors in Farmingdale, said it has been unusual to see a homeowner selling and moving elsewhere on Long Island. Many of the deals he’s been involved in have been either estate sales or cases where the homeowner was moving to a different area.

“It’s been very stagnant,” Garcia said. “Typically a move-up buyer or a downsizer would have to list their house first because they’re not in a situation where they can buy and then sell. It’s a leap of faith. … Because of low inventory a lot of those potential move-up buyers or downsizers don’t have an appetite for that. They’re just staying where they are."

Garcia said he has noticed a slight softening in the market, which could lead to more negotiating between buyers and sellers. For example, homeowners are starting to become receptive to negotiating on price based on issues that come up in a home inspection, which has been rare over the past few years.

“Buyers, to their credit, do recognize, that if a home is on the market for three or four weeks, there is potential for a better deal and being able to negotiate with the seller,” Garcia said.

Haggerty, of OneKey MLS, said he doesn’t see the current market dynamic of low inventory and fewer sales changing in the next few months.

“I really think we’re not going to see the break in this trend until 2024,” Haggerty said. “We’re basically stuck in a rut.”

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.