Hot Long Island housing market shows signs of slowdown in second quarter
Posted On July 28, 2022
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Long Island home prices continued to set records in the second quarter, but a decline in sales showed signs that rising mortgage rates began to weigh on the market.
The median sale price in the second quarter was a record $605,000, or 9% higher than in the same period in 2021, according to new data released Thursday by real estate brokerage Douglas Elliman and appraisal firm Miller Samuel. That figure excludes sales in the Hamptons and on the North Fork, which the firms report separately.
The number of closed sales in the second quarter was 7,127, or 7.4% fewer than during the three-month stretch in 2021. Meanwhile, the number of homes for sale rose by 2.4% to 6,919 by the end of the period compared with a year earlier.
In the Hamptons, the median sale price rose 13.9% to a record $1.6 million, and on the North Fork the median hit a record $905,000, or 14.6% higher than a year ago. The number of transactions dropped 34.7% in the Hamptons and 10.3% on the North Fork.
Across the Island, buyers’ options significantly improved in the second quarter. The supply of listings, excluding the East End, increased in the quarter by 74.2%, rising from just 3,972 homes at the end of March. That’s the largest percentage increase in that time in a decade, said Jonathan Miller, CEO of Miller Samuel. In the past 10 years, the average increase from the end of the first quarter to the second has been about 14%, so the change isn’t explained by usual seasonal trends.
“The market is pivoting,” Miller said. “The slowdown as illustrated by the rise in inventory is noticeable. It’s significant. It’s more than a seasonal uptick, and we’re also seeing sales start to fall.”
Mortgage rates played a major role. The average 30-year fixed mortgage was 5.54% for the week ending July 21, according to mortgage giant Freddie Mac. At the end of 2021, the average was 3.11%. Higher prices and rates have made U.S. homes the least affordable in decades.
The wild swings in the mortgage market have added an extra layer of anxiety for buyers, said Nicole Chimento, a real estate agent at Realty Connect USA in Hauppauge.
“It’s a constant fear of, ‘How much higher are they going to go? By the time I get into contract, am I going to be able to afford this monthly payment?’”
Of course, it’s all relative, and the recent increase in houses on the market hasn’t erased the Island’s shortage of homes for sale. Inventory at the end of June — 6,919 listings — is roughly half of what it has averaged at that time of the year for the past decade, about 12,900.
That shortage led a record percentage of sales to go for above the sellers’ asking price. Among all sales on Long Island, excluding the East End, 59.2% sold for higher than the list price, which can be a sign there was a bidding war among buyers. In the second quarter of 2021, 45.8% of houses sold for above asking price.
The combination of prevalent bidding wars and a rising number of houses hitting the market make it a good time for sellers to list their home if they’re on the fence, said Barbara Schultis, senior executive manager of sales for Douglas Elliman in Merrick.
“We don’t know where the market will be in six months or a year or two from now,” Schultis said, “but right now you’re the shiny penny in the jar of change.”
Lynn Deeg, a real estate agent with Coldwell Banker American Homes in Ronkonkoma, said she’s noticed an uptick in inquiries from sellers compared with a few months ago and recently took on four listings.
“What’s different is more people calling me to put their houses for sale,” Deeg said. “Perhaps they were afraid the market might go down and they’re trying to grab the price.”
The number of listings has climbed on the East End as well. Listings rose 73% from the end of the first quarter to the second quarter on the North Fork and 33.5% in the Hamptons. More homes typically hit the market toward the end of the summer out East, said Todd Bourgard, Douglas Elliman’s senior executive regional manager of sales for the Hamptons.
Even as more homes come to market, Miller expects prices to plateau or rise more slowly rather than drop. The pandemic-era bidding wars, which have been tied to historically low interest rates, were never built to last, he said.
“That’s not a sustainable condition,” Miller said. “In many ways the spike in mortgage rates and the slowdown that it’s causing is probably better for the housing market in the long run.”