At midyear, housing market pins hopes on lower rates and higher inventory

The Long Island housing market went through a June swoon, as home sales dipped and prices climbed to record highs, continuing the trend that has hampered the industry throughout the first half of the year.

There were 2,319 homes contracted for sale in Nassau and Suffolk counties last month, a year-over-year decline of 5.5 percent from the 2,452 homes contracted for sale in June 2023, according to numbers from OneKey MLS. June’s pending Long Island home sales also fell 5.5 percent from the 2,454 homes contracted for sale in May.

Home prices on Long Island set new records again. The median price of closed home sales in Nassau last month rose to $775,000, an increase of 13 percent from the $690,000 Nassau median price recorded a year ago and the highest ever.

In Suffolk, the median price of closed home sales in June reached $640,000 for the first time ever. That’s a 13.3 percent spike from the $565,000 Suffolk median price recorded in June 2023.

Despite hopes that this year’s Long Island housing market would rebound from a disappointing 2023, the numbers from the first six months show that recovery has yet to materialize. While last year’s home sales were the weakest since 2014, the first half of this year was just as dismal with 10,082 closed home sales in the first six months, 4.6 percent fewer than the 10,571 closed home sales in the same period last year.

On the bright side, inventory is up, and mortgage rates are down, at least somewhat. There were 5,758 homes listed for sale with OneKey MLS at the end of June, 16.7 percent more than the 4,932 homes that were listed for sale a year ago and a 5 percent bump from the previous month. The number of homes currently listed for sale on Long Island is the most in 18 months.

The current average mortgage rate for a 30-year fixed loan is 6.875 percent, slightly lower than it’s been in recent weeks. The rise in inventory and the drop in rates have been cause for some optimism heading into the second half.

“I feel that we’re trending upward from last year. Last year was a disaster in my opinion,” said Jesse Sasso, branch manager and loan officer at Contour Mortgage in Huntington. “What I’m seeing is that finally people are starting to understand that the rates from COVID were an anomaly. So, they’re not expecting those rates anymore. The reality has set in that the rates are what they are.”

Though higher rates contributed to a hugedrop in mortgageapplications in 2023, business was also impacted by the fewest number of home sales in nearly a decade, largely due to ahistorically low supply of available homes for sale.

“The consistent problem has been the inventory. I don’t really have clients who are fixated on the rates being high,” Sasso said. “What they’re fixated on is that they can’t find anything. The running joke is they’re making a lot of friends because the same people are at every open house, that’s how little inventory there is.”

Ken Olson, an associate broker with HomeSmart Premier Living Realty, which has six Long Island offices, said he is starting to see more homes being listed.

“I’m seeing a steadier flow at my open houses with two or three solid offers, but I think everyone is still in kind of a holding pattern,” Olson said. “I tell buyers if rates drop, I think we’ll see another spike in home prices, even though we’re seeing more homes coming on the market it’s just not enough. If rates drop, we’ll see more buyers jumping into the pool and we’ll see another surge.”

The higher mortgage rates and the competition for homes that come on the market has fueled more cash sales.

“The cash buyers are out there and they’re paying market-rate for certain homes,” Olson said. “I Just sold one in Franklin Square where the buyer went $20,000 over asking all cash. The seller might have had offers $10,000 to $15,000 over that, but when you come in all cash you don’t have to worry about an appraisal and cash is still king in that sense.”

Looking ahead to the second half of the year, both Olson and Sasso predict a further drop in rates and better times ahead for the housing market here.

“ Recently, the rates are trending under 7 percent, and you would be amazed in the psychology part of that. If we can stay under 7 percent, it’s going to be a great thing and you’re going to have more activity as far as buyers are concerned and my outlook is very positive,” said Sasso. “If we can get into the low sixes and the high fives that’s like pre-COVID rates, and I think we’ll have an explosion, as long as we have the inventory.”

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