Call it the tale of two Long Islands.
Residential inventory is rising and home prices are continuing to trend upward in Nassau and Suffolk counties. The data suggests the local residential real estate market is getting more favorable to buyers as moving season arrives in April, but a closer look reveals a murkier truth. Competition remains fierce for starter homes, while those who can afford to buy one of the region’s generous selection of luxury homes are slower than usual to sign on the dotted line.
“The market is changing,” says Arleen Goscinski, ASA, an East Northport-based appraiser and former broker who noted that last year was a strong sellers’ market with a low inventory that caused prices to rise and generated frequent multiple offers. “Interest rates are rising, financial markets are volatile, and wages are not keeping up with inflation.”
Nassau reported a $525,000 closed median home price in January, representing a 5 percent increase over last year, while Suffolk reported a closed median price of $380,000, a 5.8 percent increase over what was reported a year ago, according to the Multiple Listing Service of Long Island (MLSLI). The total number of Long Island residential inventory in January was 15,270, a 14.4 percent increase over last year, MLSLI said.
The shift follows a national trend.
“The central storylines in the U.S. housing market didn’t change much over the past few years, but a series of emerging trends is setting up a much different narrative for 2019,” said Zillow Senior Economist Aaron Terrazas. “Certain headwinds — including rising mortgage interest rates, higher rents and stiff competition for housing in the most desirable areas — will only grow stronger over the next year, but that won’t necessarily be a bad thing. A slower-moving market is likely to give more buyers a chance to catch their breath and choose from a wider selection of homes.”
Half of local business owners believe residential real estate prices will increase this year, down from 66 percent last year, according to the 2019 Long Island Economic Survey and Opinion Poll released by the Hauppauge Industrial Association of Long Island in February. Twenty three percent of respondents believe prices will decrease and 27 percent believe prices will remain the same.
Further complicating things is the impact of the new $10,000 cap on State and Local Tax (SALT) deductions and Nassau’s property tax reassessment, which has put tax bills in flux for many local homeowners. Forty percent of respondents to the HIA study are concerned that the tax reform will have a negative impact on the value of their home. Fifteen percent said they will either downsize or move out of state as a result.
“As purchasing power diminishes, a decline in property values generally ensues,” Goscinski says.
Rich Amato, operating principal/broker of Keller Williams Greater Nassau and Points North, remains optimistic.
“We have researched past markets and the current market conditions thoroughly and expect the market on Long Island to remain strong,” he says.
That said, he expects the April market to continue to have relatively low inventory levels, especially in affordable areas of Nassau.
“We have seen some slowing in the luxury market and expect this trend to continue,” he says. “The starter and investor markets remain very strong as demand for entry-level homes is still heated and homes that represent a value still get multiple offers.”
“The decrease in SALT deductions has not helped the market, especially in some of the higher-taxed areas,” he adds. “We do hear people talking about it, but people who want to buy a home will still buy a home. They will just buy a different home or lease a different car and make it work.”
Mortgage guarantor Freddie Mac agrees, suggesting buyers shouldn’t expect this year’s market to be much easier to navigate.
“While housing activity has clearly softened over the last nine months … ,” the agency said in a recent report, “lower mortgage rates and a strong job market should rekindle demand for the spring homebuying season.”