Long Island’s housing market started to settle down in February, as the number of homes going into contract returned to normal levels after months of frenzied activity.
Buyers signed contracts to purchase 2,028 single-family homes last month, an uptick of 0.2% compared with a year earlier, the brokerage Douglas Elliman and the appraisal company Miller Samuel said in a report to be released Thursday.
It was the first time since last summer that pending single-family home sales held fairly steady compared with a year earlier. By contrast, previous annual increases have ranged from 41% in July to 3.5% in January, reports show.
The market "is pretty much coming back to normal," after the fierce competition last year among buyers leaving New York City as the pandemic took hold, said George Castera, broker and owner of Castera Realty Corp. in Freeport.
Buyers, he said, "are realizing that some of these prices are inflated because of the [COVID-19 pandemic] situation and not because of the value."
Over the next few months, prices are likely to stabilize and could decline a bit, he said.
One reason Long Island pending sales leveled off last month was that there simply weren’t enough homes to go around, said Jonathan Miller, president and CEO of Miller Samuel. The number of homes newly listed for sale last month fell by nearly 37% compared with the previous February, the report shows.
"The difficulty in finding a home is reducing buyer confidence," Miller said. "They’re not diving in as they once were."
High-end home sales remained elevated compared with a year ago, with contract signings up year-over-year by 66% among homes listed for $1 million or more, and by more than 50% for homes priced between $600,000 and $1 million, the report shows. The numbers exclude sales on the East End.
In the Hamptons, the number of pending single-family home sales jumped year-over-over by 72%, and on the North Fork, 33 homes went into contract last month, up from 29 a year earlier, a 14% increase, the report shows.
Long Island’s generally calmer market was due in part to the recent uptick in mortgage rates and in part to last month’s heavy snowfall that kept some buyers from venturing out, said Jo Ann Boettcher, an agent with Douglas Elliman in Babylon. The average mortgage rate was 2.97% last week, up 0.16 percentage points from a week earlier, mortgage giant Freddie Mac reported.
Even a slight increase in rates can knock some buyers out of the market, since the higher borrowing costs mean they qualify for lower loan amounts, Boettcher said. "The margins are so thin sometimes they're just barely making it, and if interest rates change, they don't make it anymore," she said.
Demand remains strong, though, especially for homes priced under about $550,000, she said. An open house last month for a four-bedroom home in North Babylon priced under $500,000 drew 50 prospective buyers who lined up down the block to view it, and the seller received 15 bids, she said. A four-bedroom home in Lindenhurst was listed in January for $525,000 and went into contract over the asking price less than a week later, after four prospective buyers got into a bidding war, she said.
"The market’s hot, but there’s very little inventory," she said.
Now that COVID-19 vaccine distribution is ramping up, more homeowners — especially senior citizens, who have been "extremely cautious" about exposure to the virus — are likely to feel more comfortable listing their homes, which could lead to an increase in the supply of homes for sale, she said.
"That will make a huge difference" for buyers, she said. "When you have more of a supply, they’re not beating each other up for the house. If it's not this one, it'll be the one next door or around the block."