Long Island home prices level off as inventory keeps sinking in January

Home prices in Nassau and Suffolk counties kept rising in January compared with the same month a year ago, but in the past few months, they have started to plateau. The number of sales dropped from last year’s levels, with listings setting a record low for the third straight month, according to new data from OneKey MLS.

The median home price in Nassau County last month was $650,000 in January, or 8.2% higher than the same mark in that month a year ago. The median price for homes in the county has ranged from $645,000 to $652,000 since October.

In Suffolk County, the median price was $520,000 in January, which represented a 10.3% increase compared with January 2021. The median sale in Suffolk has ranged from $518,000 to $525,000 since September.

The small selection of homes on the market has constrained sales. The number of sales in Suffolk fell by 16.7% in January to 1,342 compared with closings from the previous year. In Nassau, the year-over-year drop was 7.3% to 1,172, reflecting Long Island’s severe shortage of listings. The number of homes on the market kept falling in January to a record low of 4,424, a nearly 1% drop from the previous month.

"We're seeing a shortage of inventory across the country," said Daryl Fairweather, chief economist at Redfin. "Part of that has to do with new listings coming down. At the same time homes are selling really quickly."

If homes continued to sell at the pace deals went into contract last month, it would take 2.4 months to sell all the listings in Nassau and 2.2 months in Suffolk. It takes about five to six months of supply to put buyers and sellers in an even negotiating position.

Jared Garcia, a real estate agent and team leader at Weichert Realtors Performance Homes in Farmingdale, said it’s still common for sellers to get five or more offers on homes, allowing them to receive above their initial asking price. He advises buyers to look for homes that have been on the market at least 20 days to find situations where they might be able to negotiate the price.

Garcia said he is hopeful that seasonal trends in which more homes are on the market in the spring will return after the pandemic distorted some of the typical seasonality over the past two years.

"Over the last 30 days or so the inventory has just gotten so tight that there’s no way to keep up with the buyer demand that we have," Garcia said.

Despite the continued tough market for buyers, their position improved slightly from December when there was just 2 months of supply in Nassau and 1.7 months in Suffolk. That’s because the pace of homes going into contract slowed.

Pending sales, in which the buyer and seller have reached a deal but have not yet closed, dropped 12.7% in Nassau to 915 and 13.8% in Suffolk to 1,039 compared with the number of contract signings in January 2021. Those figures represent the lowest levels since May 2020, when the Island was gripped by the first wave of the pandemic.

Rising mortgage rates could take some buyers out of the market if potential monthly payments increase beyond their budgets. The average rate for a 30-year loan was 3.69% for the week ending Feb. 10, which was the highest it has been since January 2020. A year ago the average rate was 2.73%, according to mortgage giant Freddie Mac.

The increase in rates has already started affecting buyers’ budgets, said Tim Galligan, a real estate agent and team leader at Keller Williams Points North in Woodbury.

He noted that the increase of one percentage point has drastically reduced buying power. At today’s rates, the monthly payments to purchase a $700,000 house are almost the same as what a homeowner would have paid each month to buy an $800,000 home a year ago, when rates were about one point lower.

"Buyers are just starting to catch on and realize," Galligan said. "One percentage point in an interest rate sounds small but it’s a huge difference. It should definitely speed things up."

Further increases in rates could make the housing market even tougher for buyers, said Fairweather, the Redfin economist. "When rates go up, people rush to buy homes as quickly as they can before they go up even more," she said.

Long Island's housing inventory could worsen, too, if homeowners who refinanced at all-time low rates decide not to sell.

"Higher mortgage rates can constrict listings, and that in turn constricts sales, because homeowners want to stay put," Fairweather said.

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.