Long Island home prices hover near highs, as agents wonder when more sellers will emerge
This five-bedroom high ranch in Elwood is on the market for $749,000. Credit: VHT Studios
Long Island home prices hovered near records in the fourth quarter of 2023 as the highest mortgage rates in more than 20 years did little to dissuade homebuyers.
The median sale on Long Island, excluding the East End, went for $635,000 in the October-to-December period, which was up 7.6% compared with the same period in 2022, according to new data from real estate brokerage Douglas Elliman and Manhattan appraisal firm Miller Samuel. The record for the region was $640,000 during the third quarter of last year.
The Hamptons shattered its previous price record, with the median sale at $1.85 million — a 45% increase compared with the fourth quarter of 2022 — because deals worth more than $5 million made up a greater share of sales than usual. The median price on the North Fork fell 2.1% to $974,250.
Despite the record prices, Long Island’s housing market has been in a rut with an unusually low number of houses changing hands. The number of sales on Long Island, excluding the East End, fell 13.5% in the fourth quarter compared with the same period in 2022 to about 5,500.
WHAT TO KNOW
- The median home sale price on Long Island excluding the East End in the fourth quarter was $635,000, close to its all-time high, and 7.6% higher than a year ago, according to a new report from Douglas Elliman and Miller Samuel.
- In the Hamptons, the median was a record $1.85 million, which was about 45% higher than the median sale in the fourth quarter of 2022.
- A record low number of listings has helped drive prices higher. An expected drop in mortgage rates this year would lower homebuyers' interest costs but might increase competition for homes.
That has been driven by an imbalance between demand and the supply of sellers putting their homes on the market. About 53% of all sales in the fourth quarter sold for above asking price, a sign that there were multiple bidders making offers, said Jonathan Miller, CEO of Miller Samuel.
“When a little more than 1 in every 2 sales results in a bidding war, it’s not normal,” Miller said. “This is a distortion that’s driving prices higher, and the lack of inventory is the most important housing metric of the day.”
At the end of December, Nassau and Suffolk counties both had the fewest number of listings since Douglas Elliman and Miller Samuel began reporting data in 2002. A report earlier this month, from OneKey MLS, found Long Island has the fewest options for buyers since at least the early 1980s.
“It’s not the buyers. We have buyers even at the rates,” said Lynn Deeg, a real estate agent at Coldwell Banker American Homes who specializes in the Ronkonkoma area. “We don’t have enough houses to sell.”
In Suffolk, excluding the East End, the median sale was a record $575,000 in the fourth quarter, an increase of 8.5% compared with the same stretch of 2022. That's an all-time high for the county, excluding the East End. But the median price for the entire county reached $600,000 in November, according to OneKey MLS's monthly reports.
In Nassau, the median sale price rose 7% year-over-year to $715,000 during the quarter.
Mortgage rates for 30-year fixed loans rose steadily after Labor Day, peaking at 7.79% in late October, which was the highest the average rate had been since 2000, according to mortgage giant Freddie Mac. They’ve since fallen by more than a percentage point to 6.6% for the week ending Jan. 18.
There’s optimism that mortgage rates will fall gradually this year, but given the depth of the Island’s housing supply problem, it’s unlikely to be resolved quickly, Miller said. That means that while more properties could change hands in 2024, there won’t be a flood of options for buyers.
“There’s going to be improvement in slow motion,” Miller said.
One major problem keeping people from selling is that the vast majority of homeowners have low mortgage rates. Real estate brokerage Redfin said earlier this month that 88.5% of mortgaged U.S. homeowners have mortgage rates below 6%. About 6 in 10 homeowners with mortgages have a rate below 4%.
“If they have a low-interest mortgage, they’re certainly not going to purchase now to go into a mortgage that’s probably double the rate they have,” said Tony Piscopio, senior executive manager of sales for the North Shore region at Douglas Elliman.
The lack of available listings is an opportunity for homeowners willing to sell but it’s more daunting for Long Islanders who don't already own another property.
“Why not exercise the opportunity now, especially if it’s an attractive property? We know that we’re going to have multiple offers and lots of activity,” Piscopio said. “The people that are holding back are the people that really don’t have a place to go and they’re unsure.”
A Fed pivot
As inflation has slowed, the Federal Reserve changed its tune in December, signaling that it expects it could cut its benchmark interest rate as many as three times this year.
Greg McBride, chief financial analyst at Bankrate, said he expects two rate cuts from the Fed this year and predicted the average 30-year fixed mortgage rate will end 2024 at 5.75%.
“The Fed is expected to begin trimming interest rates this year, roughly in the middle of the year,” McBride said. “That should contribute to mortgage rates trending lower through much of the year.”
That could help make homebuyers’ borrowing costs more affordable, but it won’t solve some of homebuyers’ problems, namely a limited selection of homes and escalating prices.
“From a prospective homebuyers’ standpoint, the Fed is not going to transform this housing market from a frog to a prince,” he said.
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.
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