This three-bedroom ranch in Miller Place, which first hit the...

This three-bedroom ranch in Miller Place, which first hit the market in October, is listed at $479,990.  Credit: Max Masala/VHT Studios

December was the slowest month for Long Island home sales since June 2020, as this autumn's surge in mortgage rates damaged affordability.  

The number of sales across the Island fell nearly 35% compared with December 2021 to 2,054, and home prices showed further signs of weakness to close out the year.

Prices for pending sales — those that are in contract but have not yet closed — are falling year over year, according to data from OneKey MLS.   Prices for sales that closed in December were up slightly compared with a year ago, but the increase was the smallest in years.

"It's been a while since we've seen any kind of indicator that prices are declining," said Richard Haggerty, CEO of OneKey MLS. "Buyers may then sense opportunity."

WHAT TO KNOW

  • The number of home sales on Long Island in December was nearly 35% lower than it was during December 2021.
  • Prices have started to fall year over year among sales that were in contract last month in both Nassau and Suffolk. 
  • Local real estate agents said that low housing inventory is helping to keep prices from falling further. 

The median price among sales in contract in December was $630,000 in Nassau County, or 3.1% lower than in December 2021. It was the lowest median for pending sales since January 2021.

In Suffolk, the median pending price fell 4.1% to $513,250 last month compared with the same month a year ago. That was the lowest it has been since March 2021.

The median prices for closed sales, which reflect deals reached earlier in the fall, were higher. In Nassau, the median among completed sales increased 1.6% year-over-year to $655,000. In Suffolk, that figure increased 3.3% to $542,500.

Because it can take a few months for some deals to close, "pending price is going to be more indicative of what’s happening right now," Haggerty said.

Sellers trying to decide on a price should look at a few comparable homes in their area on the market now, not properties that sold six months ago, said Lina Lopes, an associate broker who leads a team of agents at Douglas Elliman in Farmingville. Listing too high can lead homes to linger on the market.

“You don’t want to be the house the buyer sees that helps sell the other houses” because homebuyers see better value elsewhere, she said.

The housing market was walloped last year by the fastest rise in mortgage rates since the early 1980s. The average rate for a 30-year fixed mortgage ended last year at 6.42%, which is more than double the rate from a year earlier. It had reached as high as 7.08% in late October and again in early November.

While the pace of sales has slowed, what stands out is the jarring contrast to the hot market of 2021 and early 2022, Lopes said.

“The big difference is we never had it where you were on the highway going 150 miles per hour and then all of a sudden you went down to 55,” she said. “We haven’t seen this much of a turn that fast in a long time.”

Rates have fallen in recent weeks, dropping to 6.33% as of Thursday, and are expected to fall further after the U.S. Labor Department this week reported inflation has eased. If inflation continues to abate, and the Federal Reserve slows or ends its string of corresponding increases to its benchmark interest rate, mortgage rates could move lower later this year.

Home prices have stayed high despite the higher rates because of a lack of listings on the market, which has kept sales competitive among homebuyers. But the supply of homes is beginning to grow. The number of listings increased by 8.8% in Nassau at the end of December compared with a year earlier and by 21.1% in Suffolk County compared with December 2021, when listings were near the lowest point in 20 years. 

 Many homeowners are hesitant to move because they would need to replace a mortgage rate around 3.5% with one above 6%, said Tim Galligan, who leads a team of agents at Keller Williams Points North in Woodbury. He said the market could shift in buyers’ favor in the next 12 to 18 months if more of those homeowners eventually decide to sell.

“Prices are where they are because inventory is so low,” Galligan said. 

Lower prices and mortgage rates could help draw more homebuyers back into the market, said Haggerty, of OneKey MLS. 

"I think you will see buyers looking at what appears to be a stabilizing interest rate environment and inflation pressures seeming to come down," he said. "They might potentially see more attractive prices and hop in the market."

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