Long Island’s housing costs are out of reach for the typical resident, though low interest rates are making homeownership a little more affordable, a new report shows.
It would take nearly two-thirds of the average local wage to buy a home in Nassau County and more than half the typical paycheck to do so in Suffolk, the California-based real estate information company ATTOM Data Solutions is due to report Thursday. In both counties, home prices increased faster than incomes, the company said in its second-quarter report.
Due to the region's high home prices, most buyers are two-income couples unless they are purchasing a two-family home that provides rental income, said Phyllis Realmuto, an associate broker with Daniel Gale Sotheby’s International Realty in Port Washington.
Buyers also find creative ways to finance their purchases, such as borrowing against their 401(k) retirement accounts or purchasing a fixer-upper, she said. "If you're willing to put in a little bit of work, things are still more reasonable," she said.
In Nassau County, homes sold for a median price of $536,000, up 3% from a year earlier, ATTOM reported. To afford a home at that price — including the cost of interest, insurance and property taxes, and assuming a 3% down payment — a resident would need to earn about $144,000 a year, ATTOM found. The analysis assumes homebuyers would spend 28% of their income on housing, as some lenders recommend.
However, the average worker earns slightly less than $65,500 a year, ATTOM reported. At that salary, a one-income family would need to spend 63% of their paycheck to afford a typical house.
In Suffolk County, the median price was $410,309, up 7% annually. It would take an annual income of about $118,000 to afford that home, assuming the same 3% down payment and 28% debt-to-income ratio, ATTOM reported.
The average annual wage in Suffolk is just under $62,000 a year, the report showed. To afford a typical house would take 53% of that income.
In both counties, salaries increased by 2% from a year earlier, rising more slowly than home prices, the company said.
In addition to high home prices and property taxes, the $10,000 limit on federal tax deductions for state and local taxes “is making homes effectively even more expensive on Long Island,” said John Rizzo, chief economist for the Long Island Association, the region’s largest trade group.
However, the recent drop in mortgage rates helps to offset those costs, he said. The average home loan rate was 3.13% last week, the lowest on record, mortgage giant Freddie Mac reported.
“Mortgage interest rates are now at historically low levels, so that should help,” Rizzo said.
Home prices have risen since Long Island real estate agents were allowed to resume in-person work earlier this month after the COVID-19 shutdown, Realmuto said.
Realmuto said she listed a home in Baldwin on Friday for $565,000, a price that was comparable with similar homes. “I had about 30 bids, and it went way over asking,” she said. “There has been an uptick in pricing because there was pent-up demand.”
Property taxes are a perennial concern, but even more so now that Nassau has reassessed home values, she said. “That has definitely affected buyers, so when I take a buyer out I tell them, ‘We have to check the taxes,’” she said. Unexpectedly high taxes, she said, “can knock them out of the box.”