Long Island home sales plummet as mortgage rates hit recent peak in November
This four-bedroom expanded cape in Hicksville went into contract earlier this month. It was last listed at $595,000 after initially hitting the market at $615,000 in October. Credit: Daniel Gale Sotheby’s International Realty
Fewer Long Island homeowners are reaching deals to sell their homes as rising mortgage rates shrink the pool of buyers.
The number of Long Island pending home sales — deals that were in contract but had not yet closed — fell by 31.3% last month compared with November 2021, according to data released Thursday by OneKey MLS.
While sales are stalling, prices have defied this year's surge in rates and continue to rise compared with last year. The pace of appreciation has slowed considerably since last year, however. The average 30-year fixed mortgage rate was 6.31% in the past week, which is more than double its level from a year ago, mortgage giant Freddie Mac announced Thursday.
The median sale price among deals that closed last month in Nassau County was $668,000, or 2.5% higher than in November 2021. The median among Suffolk County sales rose 4.8% to $545,000.
WHAT TO KNOW
- The number of Long Island home sales that went into contract last month fell 31% compared with November 2021.
- Mortgage rates have more than doubled in the past year, reducing the pool of homebuyers.
- Local home prices for closed sales increased in November compared with the same month a year earlier, but the pace of appreciation has significantly slowed.
On a month-to-month basis, the median price in both counties has fallen or stayed the same in each of the past four months. That’s not an unusual trend given the seasonal nature of local real estate sales.
Prices for pending deals, which give a more recent picture of the market, suggest closed prices could move lower in future months. The median price of a pending sale in Nassau was down 0.9% in November to $649,000 compared with the previous year. It’s the second straight month that pending prices in Nassau have shown year-over-year declines, which before last month hadn’t happened since April 2020.
The median pending sale in Suffolk went for $534,500 in November, or 2.8% above the mark from a year earlier.
A slowing pace
The number of contracts signed in November shows a dropoff in demand.
There were 800 pending home sales in Nassau last month, which was the fewest since May 2020, when Long Islanders were dealing with the first stage of the COVID-19 pandemic. Pending home sales in Nassau fell by 35.3% compared with November 2021.
In Suffolk, there were 1,043 pending sales in November, which was 27.9% fewer than in the same month a year ago.
“Coming off 2021 and even early 2022, it’s an adjustment because the agents were so used to that fast pace,” said Deirdre O’Connell, CEO of Daniel Gale Sotheby’s International Realty in Cold Spring Harbor. “The pace of the market is just not the same. We’re certainly selling fewer homes.”
Homes in good selling condition that are priced reasonably based on comparable sales in the past few months are able to attract buyers and some still receive multiple offers, O’Connell said.
“Prices seem to be hanging in there,” she said. “They certainly haven’t tumbled.”
The pandemic disrupted typical seasonal trends in real estate, but they appear to be re-emerging, with sales slowing down toward the end of the year and picking back up in the spring, said Richard Haggerty, the president of OneKey MLS, who will start as CEO on Jan. 1.
"It's very challenging to try to compare this market to the market we had once real estate professionals were able to show properties in person again in June 2020," Haggerty said. "The pace was so frenzied. It wasn't sustainable. What we're seeing now is a return to a more normal market and seasonality."
Lower demand has meant some homes sit on the market longer, increasing the number of homes available to buy. The number of listings at the end of November increased 9% to 6,020 compared with the same figure a year earlier. Still, in November 2019, before the pandemic started, there were more than 11,000 listings to choose from.
The slower pace has given buyers more time to make decisions about their purchase, while the combination of high mortgage rates and low inventory has led some to wait until next year, O’Connell said.
“We don’t have a lot of inventory,” she said. “We certainly have more than at this time last year but not enough inventory to make buyers comfortable that they have enough to choose from.”
Buyers are starting to see more stability in interest rates. The weekly average rate for a 30-year fixed loan reached a 20-year high, at 7.08%, last month but has since fallen for five straight weeks to Thursday's 6.31% mark.
Rates increased so quickly this year that it was challenging for homebuyers to know which houses they could afford to buy, said Quentin Hardy, market leader at direct lender Movement Mortgage in Huntington. If rates continue to move lower, buyers will have more peace of mind.
“If the rates are declining, you are out there shopping knowing that your buying power is going up,” Hardy said. “If it’s going the other way, the danger is you can make an offer on a house and by the time they accept your offer, if you were pushing the limits of your approval, you no longer can afford the home.”
Volatility in both interest rates and the stock market has made it difficult for homebuyers to plan ahead, Haggerty said.
"When you have that degree of uncertainty, that can weigh on the market as well," he said. "The fact that interest rates do seem to be stabilizing is a very hopeful sign as we go into 2023."
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.
