Bidding wars break out in more than 1 in 3 home sales, driving up Long Island prices, report shows

Home prices soared to new highs on Long Island as bidding wars erupted in more than one in three sales at the end of last year, a new report shows.

Long Island homes sold for a record-setting median price of $525,000 in the last three months of 2020, up 15.4% from a year earlier, the brokerage Douglas Elliman and the appraisal company Miller Samuel said in a report to be released Thursday. The figures do not include East End sales.

More than 37% of sales on Long Island, outside of the East End, closed above the most recent asking prices, indicating that bidding wars drove up values, said Jonathan Miller, president and CEO of Miller Samuel.

It has become common for homes priced under $1 million to attract multiple offers that drive prices over the list price, said Deepak Hemrajani, CEO of DH Citadel Real Estate in Plainview. Open houses have been "extremely busy," with some prospective buyers waiting in line for more than an hour, he said.

East End prices also broke records, with the median price skyrocketing year-over-year by 55% to $1.4 million in the Hamptons and by 24% annually to $805,000 on the North Fork, the companies reported.

The rising prices are the result of sharply increased demand for homes throughout Long Island, along with pent-up sales activity after the spring COVID-19 shutdown and rock-bottom mortgage rates, Miller said. The average rate was 2.77% last week, down 0.83 percentage points from a year earlier, mortgage giant Freddie Mac reported.

Homebuyers were "chomping at the bit" when the shutdown ended in June, and demand hasn’t let up since, Miller said. "The ability to work remotely… has changed thinking about the relationship between the city and suburbs," giving more people the ability to work from home offices located far from Manhattan, he said.

And while buyers’ appetite for suburban homes has grown, he said, sellers "are firmly in control…we simply aren't seeing inventory come on at a fast enough pace to [meet] demand."

The number of homes listed for sale on Long Island, outside of the East End, plummeted by 28% in the October-through-December period, compared with the fourth quarter of 2019, the report shows. It would take 1.9 months to sell all the listed homes at the current pace of sales, the lowest on record, Miller said. Brokers say a six- to eight-month supply of homes creates a balanced market.

It’s impossible to know exactly what 2021 will hold, but prices are unlikely to continue rising the way they have been for the last few months, Miller said. "Setting price records every quarter is not a sustainable phenomenon," he said.

The number of listings is likely to rise this year, which should help the market, said Ann Conroy, CEO of Douglas Elliman’s Long Island division.

"We feel that it will open up soon, once more people get vaccinated," she said. "Certainly the senior citizens in our communities are more reluctant to allow people to see their homes, and once everybody's vaccinated, they will put their homes on the market."

By Maura McDermott

maura.mcdermott@newsday.commauramcdermott

Maura McDermott covers health care and other business news on Long Island.