There were those who were fortunate or one would say lucky enough—equating to excellent timing—in purchasing a home, condo, or co-op when interest rates were decreasing at historic lows back in 2020-2021. Some say it was a once-in-a-lifetime opportunity, and looking back, I truly believe it was the best time to jump into the real estate game to become a homeowner and get out of the rental syndrome of being beholden to one’s landlord.
It was and still is the most advantageous method of building wealth in the United States besides the stock market and owning a business.
To provide some statistics (from OneKeyMLS), if you bought a single-family home in Nassau County back in September 2021 where the median sale price (half the homes were lower and half were higher) was $642,500, the price at the end of August 2023 was $700,000. So the median sale price increase over that two-year period had been $57,500.
However, when observing each town, prices varied depending on the location, condition, and other variables. As I have said in previous columns, schools are the No. 1 variable that families look at when deciding where they will move, based on their individual budgets, and has had the greatest effect on prices. The average price of a single-family home during that same period went from $791,702 to $873,435 for an increase of $81,733. It’s obvious when reviewing the numbers some escalated price increases in the higher-end areas have skewed the numbers and may not reflect the average prices within a specific town.
Median sale prices for condos were higher, increasing from $621,00 in September 2021 to $660,000 by the end of August 2023, an increase of $39,000. Again, this was covering all of Nassau County and individual towns might have had increases that fluctuated depending on their location and other variables. I surmise that my hypothesis as well as speaking to numerous people showed that the affordability and demand all came into play as the typical purchaser was more into single-family homes, especially during the Pandemic.
Many leaving the cities who were working remotely needed a separate space to work out of and comparing the pros and cons of a condo unit to a single-family home might not have worked as conveniently, so a single-family home was the preference. Average sale prices of condos went from $730,271 in September 2021 to $802,709 by the end of August 2023 an increase of $72,438.
The median sales price of co-ops in Nassau County went from $279,000 in September 2021 to $308,917 by the end of August 2023, an increase of $29,917. The average price of a co-op during the same period went from $308,917 in September 2021 to $328,155 at the end of August 2023, an increase of $19,238.
The future for many sitting on the sidelines might include a possible opportunity next year or maybe not. It all depends on what the Fed does with interest rates. Inventory will not increase very much, if at all, as long as demand is still strong, keeping availability scarce. So the pressure on prices to decrease will be very minimal at best. If and only if demand were to cool off substantially would prices moderate, but one never knows at what point that would occur.
But if the Fed were to decrease interest rates by 1-1.5% by the end of 2024, assuming inflation were to get to 2%, which is their goal, then I believe the feeding frenzy would begin all over again and prices would potentially continue to increase. This will allow a certain number of purchasers to begin seriously searching for the “next place to call home.”
However, according to the Case-Schiller Index back in 2021, we needed anywhere from 1 million to 5 million new homes to satisfy demand. With supply chain disruptions, excessive price increases and construction costs soaring way beyond what was anticipated, new home prices have gone up. Most cannot afford a brand new home and resales are where a majority of the buyers are waiting in and around Long Island.
Sellers won’t give up their lowest refinanced rates in history, adding to the severe lack of available housing. So over the last two years, there have been combinations of so many factors working against most buyers. The affordability crunch due to much higher mortgage rates, lack of supply, bidding wars, escalating prices, and insufficient income has caused so many to sit on the sidelines or leave NY.
I have come to the conclusion that many (including our politicians) are in a checkmate position and are either deciding to stay in their rentals or parents/in-laws’ homes or potentially leave the area entirely to more affordable locales. We are in a housing quandary of uncertainty going forward. So the choices in homeownership are diminishing at a rapid pace.
Gov. Kathy Hochul’s housing plan, although flawed as to where construction should have been considered, is still the only viable answer since she has now revised her plan to provide monies to those communities willing to build lower-cost units. We absolutely and positively need more housing!
Are there any empty buildings in and around Nassau, Suffolk, Queens, the rest of the city or Westchester that could be renovated, upgraded, and priced at a lower price with the assistance of the state whether for sale or for rent? This will enable us to keep our Millennials, Gen Z, and others in place so we do not continue to lose our future labor market and the “brain drain” that has been occurring since the 1980s here on Long Island.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. For a free 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com