Home prices soared to a new high in Nassau County and matched a previous record in Suffolk County last month as low mortgage rates and scarce inventory forced buyers into bidding wars.
In Nassau County, homes sold for a median price of $630,000 in April, a 13.2% increase from a year before, the multiple listing service OneKey MLS reported Thursday. The previous record of $605,000 was set in December, listing service figures show.
The Suffolk County median sale price was $480,000, an annual gain of 12.9%, the listing service said. Suffolk home prices reached the same level in December, according to the listing service.
What to know
- Home prices in Nassau and Suffolk were up 13% in April compared to a year ago.
- Tight supply means bidding wars are commonplace.
- Brokers predict prices will keep rising as long as interest rates remain low and demand keeps outstripping supply.
Long Island home prices have more than doubled in 25 years, listing service figures show. In April 1996, the median price in Nassau was $176,800, or about $302,000 in today’s dollars after adjusting for inflation. Suffolk’s median home price 25 years ago was $133,000, or about $227,000 in today’s dollars.
The Island’s housing market is "some unique level of craziness," with bidding wars driving up prices and buyers waiting in long lines to get into open houses, said Stephan Mahabir, owner of Exit Realty Advantage in Baldwin. Some buyers are making rapid-fire offers way above asking prices, he said: "By the time you can make a decision about whether or not you even like the house, it’s gone."
Despite the dramatic increase in prices, the low cost of borrowing is keeping many buyers in the game. The average interest rate was 2.94% this week, mortgage giant Freddie Mac reported Thursday.
Prices are likely to keep ticking up as long as interest rates remain low and demand keeps outstripping supply, brokers said.
For frustrated homebuyers, "it's definitely going to get worse before it gets better," Mahabir said. "I think nothing will change in terms of prices declining until the [mortgage] rates go up.... What actually matters is, how much comes out of your bank account every month, can you afford that?"
Property values are rising not only on Long Island but across the country, with the National Association of Realtors reporting an annual increase of 16.2% in single-family home prices in the first three months of the year.
With interest rates expected to remain near historic lows this year and even into 2022, "I would anticipate prices to continue to go up slowly for a number of months...I don't really see an end in sight," said Jim Speer, CEO of OneKey MLS.
But if interest rates do rise significantly, that could cause prices to stabilize or dip, Speer said. "At some point the prices will likely come down a little bit," he said. "It's just a matter of how much, and I wouldn't think it would be a tremendous amount."
Speer said he does not expect prices to plummet as they did in the housing crash that followed the 2007 collapse of the subprime mortgage market. The earlier run-up in home prices was driven by loose lending standards and low levels of home equity, he said. Today's lending standards are much tighter and homeowners have far more equity, Speer said.
Asked whether a bubble is forming in the real estate market, Speer said, "Is it a bubble where there might slowly be letting some air out of it? That's a possibility. But I don't believe that it's going to be a bubble that bursts."
The shortage of homes for sale is contributing to the gains in prices, brokers said. At the pace homes went into contract last month, it would take 2.2 months to sell all the homes listed in Nassau and 1.7 months in Suffolk. That’s less than half the five- to eight-month supply that brokers say creates a balanced market.
The number of listings declined by 21% in Nassau and 39% in Suffolk last month, compared with April 2020, the first full month of the statewide COVID-19 shutdown that brought many transactions to a halt, listing service figures show.
The number of home sales made dramatic gains last month, compared with last year’s first full month of lockdown. The number of sales more than doubled in Nassau and increased by 50% in Suffolk year-over-year, the listing service reported.
It's likely that more homeowners would list their properties if they felt more confident that they could purchase another home on the Island, brokers said.
"The fear is, they don't know where they're going to go," said Mahabir, who recently had two potential sellers change their minds. "They're like, 'yeah, I know I want to sell my house, and I understand all the benefits.... but there's nothing to buy.'"