Long Island home prices climb to record $761,250 in second quarter

Long Island home prices climbed to a record high this spring, while the median price in the Hamptons cleared $2 million in the second quarter, continuing a trend of faster appreciation on the South Fork, according to new data released Thursday.

The median home price on Long Island, excluding the East End, rose 5% year over year to $761,250, eclipsing the previous high of $750,000 set last year, according to a report from real estate analyst Jonathan Miller and the Hamptons Real Estate Association. It was the eighth time in the last 12 quarters that home prices on Long Island, excluding the East End, have reached an all-time high, Miller said. 

In the Hamptons, the median price soared 16.1% to $2.2 million, as the popular vacation home market benefitted from record bonuses on Wall Street. 

There's been a perfect storm of factors driving prices higher in the Hamptons in recent years, including a drop in available homes for sale, a surge in demand after the pandemic and rising stock prices, said Judi Desiderio, managing partner at William Raveis Real Estate in East Hampton. But the largest factor might be the rarity of finding a prime piece of land on the South Fork.

"It's just a different ballgame out here," she said. 

The significant rise in the cost of a home has priced out much of the workforce in the area's service-based economy. With a median price of $900,000, Hampton Bays was the only submarket below the $1 million mark during the second quarter, according to a separate report published by Desiderio.

The Towns of Southampton and East Hampton have recently approved proposals to encourage more affordable rentals. 

"We've reached a point, like Nantucket, where the municipalities have to step up and provide housing," Desiderio said. "There are year-round people who want to stay here, they want to earn a living here and we need them. We need cops, firemen, teachers and people who work in the town."

On the North Fork, the median price dropped 10.4% to $979,000. Miller attributed the decline in the region, where 96 houses sold during the quarter, to more lower-priced homes selling this spring.

The North Fork market has become more balanced between buyers and sellers in recent months, particularly for homes priced at or below $1 million that need renovation, said Bridget Elkin, a real estate agent at Compass in Southold.

"The advice we're giving our sellers is to evaluate each offer as if it might be the only offer you're going to see for three months," she said. "Focus on the money people are offering you — not what they're not offering you."

The number of closings dropped 10% in the Hamptons and 17.2% on the North Fork in the second quarter compared with the same period a year ago. 

More broadly on Long Island, a shortage of houses on the market since the pandemic has led to intense competition. Nearly 56% of deals that closed in the second quarter went for above asking price. That compares with about 11% of deals in the Hamptons and just 6% of North Fork sales that received more than the list price during the quarter. 

Competition depends heavily on the price, location and condition of a house, said Kerri Passamenti, a real estate agent at Realty Connect USA in East Setauket. She said she's seen more competition for houses in areas closer to the Long Island Expressway or with shorter train commutes to Manhattan as workers spend more days in the office. 

"It's definitely still not a buyer's market," Passamenti said. "However, if someone's looking and they have flexibility, there's definitely options right now."

Competition on Long Island pushed prices up even as the start of the Iran war in February led to higher mortgage rates and energy prices in the spring, hitting buyers' budgets.

The number of transactions on Long Island, excluding the East End, during the April-to-June period fell 3.8% to 4,460 compared with the same period a year ago.

"I expected in the second quarter to see a greater slowdown because of the war and the spike in mortgage rates," Miller said.

Miller doesn't anticipate the market easing much for buyers this year because the supply shortage is unlikely to improve anytime soon. That's because homeowners wedded to mortgage rates around 3% have been reluctant to move. 

This year, with inflation picking back up, Miller expects the 30-year fixed rate won't fall much, if at all, from its current average of 6.49%, which means homeowners will have little financial incentive to sell. 

"Rates have to go down for inventory to really come into the market," Miller said.