With the increase in mortgage interest rates over the last eight months, properties are not necessarily selling as quickly as they were in the past. Rates have been down the last four weeks and just last week slipped again from 5.59% to 5.55% as of August 3rd. Rates are usually pegged to the 10-year Treasury, but the markets generally are the true determiner of rates.
They are still considerably higher than the historically lowest rate of 2.5% late in 2021 for a 30-year fixed mortgage. With the current doubling of rates the price of homes has become unaffordable for a vast majority of consumers locally and across the U.S. Even though rates are still historically lower and incomes have increased, (but purchasing power has stayed the same for the majority factoring in inflation over the last 40 years as per Pew Research Center). More importantly, the actual purchase price is far greater and in some cases as much as 5-10 times higher than they were in 2000.
To provide some perspective, the median price of a home in New York in 1940 was $45,700, in 1980 it was $90,300 and in 2000 it was $148,700. In the past and present, inflation has always been caused by the Fed with easy money, causing budget deficits, Nixon taking the U.S off of a Gold Standard, turning us into a fiat currency, and Keynesian economic policy and market psychology, during the 1970s.
Look around your local neighborhoods and you can see how high the prices are today, having truly stretched the pocketbooks of many who have left the market. They are staying put in a rental or relative’s home for the time being to wait for rates to further decrease, save for a larger downpayment or prices to ease and stabilize. Due to the severe lack of inventory on Long Island and the tri-state areas, prices won’t be crashing anytime soon.
But I think we will be heading into a more normalized and hopefully balanced market.
Historically, bubbles occur when inventory is higher than the normal for six to seven months like in 2008 when housing listings reached 11 months. This meant that it would take 11 months for all the available properties to sell. Currently, we have less than two months of inventory.
But for now, demand is still fairly strong if your home is priced accordingly for those who have the income, credit, and down payment to purchase. I believe it will take several years for housing inventory to become normal again and that will depend on real sellers who decide to put their homes on the market as well as on developers building more homes.
Median prices of sold homes in June were $720,000 up 11.80% compared with June 2021 when the price was $644,000. In Nassau County, there were 1,261 closed sales transactions and 1,250 pending transactions reported in June 2022, following 1,146 closed and 1,242 pending transactions reported in May 2022. The OneKey MLS Regional Area, covering all areas, Nassau, Suffolk, Queens, and the Five Boroughs of NYC and a portion of upstate New York, reported a closed median sale price of $615,000 in June 2022, representing a 7.90% increase as compared to the reported $570,000 in June 2021. Across the regional coverage area, there were 6,056 closed residential sales reported in June 2022, which is 15.80% more closed transactions than the 5,230 reported the month prior.
Banks are tending to become a bit more conservative in their appraisals, so what has sold in the last three to six months may be adjusted based on future analysis of the market going forward. Just because you see information on the major sites, don’t be fooled by thinking that is what you will receive when finally deciding to sell. No one from those sites has seen your home inside and the prices provided give a broad view of prices in a general locality.
One can always rely on our local MLS as the No. 1 most accurate and trusted source for information to make a clearer and more concise determination of what is occurring in our Nassau, Suffolk, Queens and other nearby areas. Analysis and prices are very clear when determining what is happening. So pricing your home is more accurately accomplished when using the MLS statistics and not through the Zestimate model.
Attracting prospective purchasers will be determined by how smart you are at pricing your home. If it is sitting for more than 30-60 days, and either not receiving the traffic or any offers, then you must look at your price and make the necessary adjustments. This will be crucial in finding one or more serious buyers to make offers to get your home sold.
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades. 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 Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.
