Long Islanders hope for downward trend as average mortgage rate dips

Aspiring homebuyers on Long Island who had hoped to see mortgage rates fall dramatically this year have been left disappointed. But Thursday’s inflation report signaled rates could move lower later this year.

The average 30-year fixed mortgage rate in the nation was 6.89% for the week ending Thursday, according to mortgage giant Freddie Mac. That was down from 6.95% during the previous week.

Three years ago, the average was 2.9% before surging inflation helped drive mortgage rates higher.

Homebuyers received positive news on the inflation front Thursday when the U.S. Consumer Price Index fell 0.1% in June, compared with the previous month. The inflation rate increased 3%, compared with the previous year — its slowest pace since June 2023. While the Consumer Price Index climbed in the New York metropolitan region, mortgage rates are influenced by the national inflation rate. 

Mortgage rates tend to rise during periods of robust inflation and fall as fears of a recession grow. They tend to move in the same direction as the yield on the 10-year Treasury note, which fell Thursday after the inflation data was released.

Since the start of the year, the 30-year fixed average rate has ranged from a low of 6.6% in mid-January to a high of 7.22% in early May, according to Freddie Mac. 

A slowing inflation rate increases the chances the Fed will cuts its benchmark interest rate at its September meeting, said Odeta Kushi, deputy chief economist at First American Financial Corp., a provider of title insurance and settlement services in Washington, D.C. But Kushi said she doesn't see the average rate falling below 6.5% by the end of the year.

"My expectation has been a very slow decline in mortgage rates through the end of the year. That’s still my expectation, though recent data, between the jobs report and [Thursday’s] CPI, has made me more confident," she said. 

Christopher Roberti, a mortgage loan originator and head of growth at Hartford Funding in Rockville Centre, said Thursday’s inflation report was welcome news, and he’s hopeful that new borrowers will finally get a break on rates, while recent buyers will be able to refinance.

In the meantime, buyers are still forging ahead with purchases, Roberti said, because they need more space to accommodate growing families or they are unwilling to pay the high rents on Long Island.

“Everyone has now come to grips with where the interest rates are,” he said. “Over the past couple of summers, there was this false hope of, ‘I’m just going to wait for things to go back to normal.’ They’ve come to the realization that we can no longer wait.”

Rates haven’t stopped buyers from pushing home prices higher. Median prices in Nassau and Suffolk counties broke records in May. The median sale price in Nassau was $790,000, or 13% higher than it had been a year earlier.

In Suffolk, the median rose 14.2% in May to $651,000, according to the latest data from OneKey MLS.

Local real estate experts have pointed to the limited number of homes on the market as the key factor behind rising prices. The shortage began to ease in Suffolk in May, with the number of homes for sale increasing 8%, compared with the same month a year ago.

However, the situation worsened in Nassau, with the number of listings at the end of May falling 17% from the previous year. 

Kieran Rodgers, a real estate agent at The Agency in Huntington, said there is still plenty of competition for homes this summer, particularly those priced below $1 million. Rodgers, who is also a mortgage banker, said first-time homebuyers often are paying $4,500 to $5,000 a month in mortgage payments, including principal, interest, taxes and insurance.

Rodgers said lower mortgage rates could help encourage more owners to list their homes.

“I believe when rates come down, we’re going to have more inventory and more options,” he said. 

The retreat in inflation is what the Federal Reserve has said would lead to lower interest rates, Jessica Lautz, deputy chief economist at the National Association of Realtors, wrote in commentary published online Thursday.

“Fed Chair Jerome Powell indicated to Congress yesterday that there is a path to lower the Fed Funds rate if inflation continues to cool,” she wrote, referring to the rate at which banks borrow from one another overnight. “Today’s reading showed a measure of cooling.”

But Lautz cautioned homebuyers shouldn’t expect to see mortgage rates fall to historic lows below 3%, where they stood a few years ago.

“Buyers waiting for mortgage rates to again be at once-in-a-lifetime lows are likely going to be waiting a very long time," Lautz added. 

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.