LI home prices fall from summer highs in September; mortgage rates at 20-year peak

The average U.S. long-term mortgage rate hit a 20-year high Thursday, ratcheting up the cost of homebuying and putting a drag on the Long Island housing market.

The average rate for a 30-year fixed home loan hit 6.92% this week, which was the highest it has been since April 2002, according to mortgage giant Freddie Mac. Just a year ago it stood at 3.05%.

Mortgage rate increases can drastically lower buyers' budgets. The monthly payment for a Long Island homebuyer using a $500,000 mortgage to finance their purchase has increased by 56% in the past year, or nearly $1,200 a month, as rates more than doubled. 

While they don't reflect the latest hikes, Long Island home prices moved lower in September compared with records reached over the summer. The median sale price in Nassau County last month was $695,000, which was $5,000 below the August median, according to new data released Thursday by OneKey MLS. Still, the median price was 5.2% higher than in September 2021, showing the doubling of mortgage rates this year hasn’t erased the past year’s surge.

In Suffolk County, the median sale price was $550,000 in September, or $15,000 below where it was a month earlier. The median price increased by 4.8% compared with September 2021. It was the first time year-over-year growth had dropped below 5% in three years.

Home prices reached record levels in July when the median was $720,000 in Nassau and $575,000 in Suffolk. OneKey MLS reports home prices in nominal terms, meaning they are not adjusted for inflation.

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 Higher mortgage rates have slowed the pace of sales. Homes that were going into contract within weeks of listing might now take a month or two to sell, said Trevor Kemp, a real estate agent at East End Luxury in Southold.

“I have a couple sellers that want top dollar but missed that market,” Kemp said. “Now that the rates went up, they have to lower [the price] to find someone. People are sitting back. If they’re paying a higher interest rate, they want to pay a lower price on the property.”

The market is changing but it is still tilted toward sellers, said Rachna Bhatia, a real estate agent with Voro in Manhasset. She helped two buyers get their offers accepted on homes last week.

“I had to fight a multiple-offer situation in both of them,” she said. “If it’s a good house, buyers are still competing.”

Volatile mortgage rates have made it more important that buyers have strong backing from their lenders to help them land a deal, Bhatia said. In some cases, sellers will accept a lower price if they’re convinced a buyer is more likely to close a deal.

 Borrowers need to stay in close contact with their lenders to ensure they understand what they can afford as rates rise, said Kevin Dayton, vice president of mortgage lending at CrossCountry Mortgage in Garden City. 

"They have to be conscious of the fact the payment today may not be the payment tomorrow, and we're going to have to stay in touch a lot more than normal up until you find a house," he said. 

 Seeing the prices of closed sales drop as summer turns to fall isn’t unusual. The median price has dropped from August to September in each of the past five years in Nassau and four out of the last five in Suffolk.  

 The median pending price, for sales that have gone into contract but not yet closed, fell for the fourth straight month in Nassau to $655,500, suggesting closing prices could move lower in future months. In Suffolk, the median pending price increased compared with the previous month for the first time since May to $550,000, matching the median for closings. 

Higher rates have resulted in fewer transactions. The number of closed sales in Nassau last month, 1,055, was 23.7% lower compared with a year earlier. In Suffolk, closings fell 20.7% to 1,335. The number of pending sales fell to the lowest level since February in both counties.

A spokeswoman for OneKey MLS said the ransomware attack on Suffolk County on Sept. 8 did not compromise its data. However, if any closings were delayed while title searches at the county clerk’s office were suspended, they wouldn’t appear in the September data.

A short supply of homes on the market continues to work in sellers’ favor. The number of homes on the market across Long Island, 6,748, was virtually unchanged in September compared with the previous month and was 4.1% shy of the level in September 2021. There are still around half as many homes for sale as there were at this time in 2019 before the pandemic started.

 “The Long Island real estate market is headed toward a more balanced market that still favors sellers because of the limited supply of inventory," Jim Speer, CEO of OneKey MLS, said in a statement.