The Long Island housing market continued to cool off last month, as higher mortgage rates chilled sales and prices.
There were 2,110 Long Island homes contracted for sale in October, down 8 percent from the 2,292 pending sales in the previous month and a drop of 29.1 percent from the 2,976 homes that were contracted for sale in Oct. 2021, according to preliminary numbers from OneKey MLS.
Home sales on Long Island have seen year-over-year declines since the pandemic buying frenzy began to calm in the second half of 2021. There were 24,785 homes contracted for sale in Nassau and Suffolk counties in the first 10 months of this year, a 19.6 percent drop from the 30,839 pending sales in the first 10 months of 2021.
The gross closing volume of Long Island home sales from January through October this year was $18.538 billion, a decrease of more than $1.17 billion from the gross closing volume of $19.71 billion recorded in the first 10 months of 2021.
Home prices have been falling. The median price of closed home sales in Nassau last month was $675,000, a drop of $20,000 from the $695,000 median price in September and the lowest median price since the $668,000 median recorded in April.
In Suffolk, the median price of closed home sales last month was $550,000, the same as September’s median and the lowest median price since April’s median of $540,000.
Still, Long Island home prices are higher than they were a year ago. Nassau’s median price of closed home sales last month is 3.8 percent higher than the $650,000 median recorded in Oct. 2021. Suffolk’s median price of closed home sales last month is 6.2 percent higher than the $517,250 median recorded in Oct. 2021.
While mortgage rates are hovering around 7 percent and more than double what they were a year ago, they haven’t impacted prices as much as expected because inventory remains historically low. There were 6,648 homes listed for sale with OneKey MLS—3,061 in Nassau and 3,587 in Suffolk—as of Monday, which is down 1.5 percent from the 6,748 homes that were listed for sale at the end of September.
Baldwin, New York — It’s not a great time for home sellers, with the Federal Reserve raising interest rates to help combat inflation, driving up the cost of borrowing money.
The average for a 30-year fixed mortgage rate briefly crossed the 7% mark before dipping to 6.95% this week, according to Freddie Mac, more than double what it was a year ago. That means monthly payments on a $400,000 loan would be more than $2,600 — nearly $950 more compared to the same loan last year.
Terri Arena received an offer for her home on Long Island, New York, well below asking price after it had been on the market for just six days. She told CBS News she is concerned that “there aren’t going to be as many people out there with the same buying power,” but she’s not ready to drop the price.
“That’s why I made that decision to put it on the market now, because if I wait until the spring, it definitely will be lower,” Arena said. “So why not try now? Even though the interest rates came up.”
Home sales in Long Island’s Nassau County are down more than 22%. It’s a trend happening across the U.S. over the last eight months — the longest slump since the start of the housing crash in 2007.
Arena’s broker, Eric Stutz, said that though prices are down, they are still much higher than before the pandemic.
“I think it is still a great time to sell now,” Stutz said. “But going forward, the market is definitely trending down and I expect home prices to continue to drop well into next year.”
That is because rising mortgage rates are shrinking the number of people who can afford to get a home loan.
“A lot of buyers have either dropped out of the market and are sitting on the sidelines,” Stutz said. “Some of them are even relocating.”
Wells Fargo economist Charlie Dougherty said it is all part of the Federal Reserve’s efforts to lower inflation.
“The Federal Reserve is cognizant of what’s happening in the housing market, but they’re willing to let the housing market go under a correction if that means inflation is going to come down,” Dougherty said.
Home sales across the country over the last eight months are down as the Federal Reserve raises interest rates. Rising mortgage rates are shrinking the number of people who can get a loan and buy a home. Lilia Luciano takes a look.
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The Federal Reserve still has a chance to meet both of its main goals — strong economic growth and stable prices — but time is running out to achieve a soft landing.
The problem is that Fed officials are fixated on raising interest rates FF00, +0.00%
several more times, including another supersize increase at their meeting Tuesday and Wednesday. They don’t seem to notice that inflation is already retreating significantly, while growth is dangerously close to stalling out.
They have a blind spot because they are looking at the past.
Fed officials ought to reach out to another government agency that has had remarkable success in achieving soft landings: The National Aeronautics and Space Administration.
NASA’s scientists know something the Fed has forgotten: It takes a long time to send and receive messages from space, so they need to account for those delays when sending instructions to their spacecraft so they can land safely on Mars, or orbit Saturn or the moons of Jupiter.
Compounding errors
It’s the same way with the economy. The signals that the Fed receives from the economy are often delayed, sometimes by months. Unfortunately, one of the main signals the Fed is relying upon right now to decide how much to raise interest rates is delayed by a year or more.
I’m talking about inflation in the price of putting a roof over our heads. Shelter prices are now the leading contributor to increases in the consumer price index (CPI) and the personal consumption expenditure (PCE) price index. But because of the way the CPI for shelter is constructed — for very good reasons — the inflation reported today reflects conditions as they were 12 to 18 months ago.
The error is compounded because shelter prices are by far the largest component of the CPI, at more than 30%.
The Fed is disappointed that inflation hasn’t declined more since it began raising interest rates in March, but how could it when the signals about shelter prices were sent last summer and fall, long before the housing market began to cool in response to higher interest rates TMUBMUSD10Y, 4.049%
and the reductions in the Fed’s holdings of mortgage-backed securities?
According to real-time data, shelter prices are no longer rising at a near-10% annual rate as the CPI and PCE price index claim. Growth in rents and house prices has slowed since the first rate hikes in March. House prices are actually falling in most regions of the country, and private-sector measures of rents show that landlords are now dropping rents in many cities.
Just like a radio signal from Jupiter, it takes time for that message to be received by the CPI. It will be received and incorporated into the CPI eventually, but by then it may be too late for the Fed to react. The Fed might crash the spacecraft because it mistakenly believes the messages it gets are in real time.
Growth is slowing
The Fed’s blind spot puts the economy in peril. Recent data show that growth is naturally slowing from the breakneck pace following the pandemic shutdowns but also from the Fed’s relentless squeeze on financial conditions.
It’s very hard to argue that the economy is still overheating. Domestic demand has stalled out since the spring. Final sales to domestic purchasers — which covers consumer spending and business investment — has grown at a 0.3% annual pace over the past two quarters.
Real disposable incomes are growing at less than 1% annualized. Household wealth has fallen off a cliff, with the stock market SPX, -0.41%
DJIA, -0.24%
in a bear market and home equity beginning to fall. Wage growth is beginning to slow. Supply chains are improving.
And the CPI excluding shelter has gone from rising at a 14% annual pace in the spring when the tightening began, to falling at a 1% annual pace over the past three months. Rate hikes are working!
This benign picture on inflation may not persist. Inflation is still worrisome, particularly for essentials such as food, health care, new vehicles and utilities.
But the Fed should adopt a more balanced view of the economy, no matter what the signals from the past say. No one wants a hard landing.
WASHINGTON — A measure of inflation that is closely monitored by the Federal Reserve remained painfully high last month, the latest sign that prices for most goods and services in the United States are still rising steadily.
Friday’s report from the Commerce Department showed that prices rose 6.2% in September from 12 months earlier, the same year-over-year rate as in August.
Excluding volatile food and energy costs, so-called core prices rose 5.1% last month from a year earlier. That’s also faster than the 4.9% annual increase in August, though below a four-decade high of 5.4% reached in February.
The report also showed that consumers spent more last month, even after adjusting for inflation, a sign of Americans’ willingness to keep spending in the face of high prices. Consumer spending increased 0.6% from August to September, or 0.3% after accounting for price increases.
The latest figures come just as Americans have begun voting in midterm elections in which Democrats’ control of Congress is at stake and inflation has shot to the top of voters’ concerns. Republicans have heaped blame on President Joe Biden and congressional Democrats for the skyrocketing prices that have buffeted households across the country.
The persistence of high inflation, near the worst in four decades, has intensified pressure on the Federal Reserve to keep aggressively raising its key short-term interest rate to try to wrestle rising prices under control. Last month, the Fed raised its key rate by a substantial three-quarters of a point for a third straight time, and next week it’s expected to do so for a fourth time.
The central bank’s latest rate hikes far exceed the quarter-point increases that it typically used in the past when it sought to tighten credit to fight inflation. But after being caught off guard beginning late last year, when prices accelerated far more than the Fed’s policymakers had anticipated, the officials have been raising their benchmark rate at the fastest pace in four decades. In doing so, they are raising the risk of a recession — something that many economists expect to occur sometime next year as a result.
The Fed’s hikes have led to much higher loan rates for businesses and consumers, particularly for mortgages. The average 30-year fixed mortgage rate surged past 7% this week, according to Freddie Mac, the highest level in two decades and more than twice what it was a year ago.
The rapid run-up in borrowing costs has crushed the housing market. Sales of existing homes have dropped for eight straight months and are down nearly 25% in the past year. New-home sales and construction are also falling.
A weaker housing market has slowed the economy, as fewer home purchases also drag down sales of furniture, appliances, and home improvement gear.
Home prices, which rocketed during the pandemic, have started to fall as a result. The S&P Case-Shiller home price index fell from July to August for a second straight month, according to the latest data available,
But those declines have yet to show up in the government’s measures of housing costs, which include rents, which are still rising for many people as they renew their leases. It could take until late spring or summer before falling home prices work their way into the government’s inflation indexes. That delay could keep official measures of inflation from falling much over the next few months.
In 2020, when the pandemic put our travels to a halt, my family bought a four-bedroom, 3,600-square-foot home in Golden Oak at Walt Disney World Resort near Orlando, Florida.
My parents had been wanting to buy a vacation home for some time. I have a now five-year-old daughter, and my brother was about to become a father, so we were looking for a place to spend quality time together.
My husband and I live about three and a halfhours away in Miami, but Golden Oak is our home away from home. Since we both work remotely, we’re able to visit at least twice a month with our daughter.
As a travel and parenting blogger, I get a lot of questions from my followers about what it’s like to have a home in Disney’s highly coveted residential community.
Disney’s Golden Oak is a gated property of luxury, single-family homes, just four miles from Disney’s Magic Kingdom Park.
There are about 300 homes that range from 1,800 square feet to 12,000 square feet. One house sold for $12 million this year, and another is currently listed at $9.5 million.
Sectioned into eight neighborhoods, the homes were designed by Walt Disney Imagineering, the Walt Disney Company division that oversees the design and construction of its theme parks.
Residents have access to pools, a fitness center, restaurants and other Disney resorts. They also have membership to the exclusive Golden Oak Club, which offers “concierge-style services,” including private VIP park tours and special event tickets.
Golden Oak first started listing homes in 2010. But despite being a Disney regular, I’d never heard of it until my parents visited friends at their vacation home there in 2020.
Cristie lives in Miami with her husband and their daughter, but they travel to their Disney-themed vacation home near Orlando, Florida twice a month.
Photo: Cristie Anne Cabrera
During their visit, they got to tour one of the newer houses. They FaceTimed my brother and me to show us the home. We all fell in love with the place and put a contract in at full asking price.
Houses in Golden Oak sell quickly, but we got lucky with timing. The entire first floor came furnished, so we were all able to enjoy Thanksgiving weekend there together just days after closing that year.
We live in The Cottages at Symphony Grove neighborhood. Each house has its own whimsical look. Ours was inspired by Belle’s cottage in “Beauty and the Beast.”
Each house in The Cottages at Symphony Grove has its own unique theme.
Photo: Cristie Anne Cabrera
One thing that all the Golden Oak homes have in common are the tiny Disney-themed details. Our property, for example, has over 50 hidden Mickey Mouses. The kids love trying to find them every time they come over.
Our house is styled as a French cottage, particularly on the first floor.
The entrance to the home is styled with a carved door and an elegant chandelier.
Photo: Cristie Anne Cabrera
The kitchen and dining room are complete with wooden beams and other countryside accents.
Distressed wooden details, intricate tiles and a towering kitchen hood give the space a French-countryside feel.
Photo: Cristie Anne Cabrera
Upstairs, the house becomes more clearly Disney-themed. On the second floor, my bedroom has a quote from “Beauty and the Beast” above the bed.
My brother’s room has “Winnie the Pooh” characters hand-painted on the walls.
The bunkbed room (a.k.a. the “Bambi” room) is tiny but full of beautiful details like wood-paneled walls and a small nightlight for each bed.
The cozy bunk beds in this “Bambi”-themed room makes it a family favorite.
Photo: Cristie Anne Cabrera
My favorite feature in entire house is a spiral staircase on the second floor that leads to “Belle’s Reading Room” on the third floor, which is now the girls’ playroom.
It has reclaimed wood beams on the ceilings, hand-painted drawings on the walls, a built-in bookshelf, and the same railing as the staircase on the windows.
Finally, there’s a guest suite that connects to the home through the outdoor patio. That whole area feels like you’ve entered a princess suite, thanks to a few Disney touches like the “Alice in Wonderland” doorknob.
We also have a small pool and jacuzzi. It’s completely surrounded by the home, making the space more private. In the patio area, there’s a dining table for six, a sitting area with a couch and chairs, a fireplace and an outdoor kitchen.
We don’t visit the theme parks too often when we’re in Golden Oak. Most of the time, we just enjoy the neighborhood and spend time at home together.
We have golf carts that we can use to visit Golden Oak’s playground, parks and resident-only clubhouse.
The kids love watching the Magic Kingdom fireworks from the dock at Disney’s Fort Wilderness. We also take my daughter there to ride ponies. In the summer, we use their splash pad and pool that has an amazing slide.
For us, this truly is the happiest place on earth.
Cristie Anne Cabrera, a.k.a. The Traveling Red, is a Miami-based mom, social media influencer and travel blogger. Follow her on Instagram, TikTok, Pinterest and her blog for a look into her travels to Disney’s Golden Oak and road trips in her school bus conversion.
The whipsaw action wasn’t limited to stocks, and was described by Rick Rieder, the chief investment officer for global fixed income at BlackRock, as “one of the craziest days” of his career.
The bond market’s warning
Some investors who focus on stocks might not realize that the bond market is much larger, and that its movements can cause government and central-bank policies to shift. Larry McDonald, founder of The Bear Traps Report and author of “A Colossal Failure of Common Sense,” which described the 2008 failure of Lehman Brothers, explained just how bad the action was in the U.K. bond market over the past few weeks, when 30-year government bonds issued in December traded as low as 24 cents on the dollar. He also predicted what will happen if the Federal Reserve continues on its current course of interest-rate increases.
Michael Brush argues the Federal Reserve is moving too quickly to raise interest rates and cool the U.S. economy. He expects a rapid decline in inflation and a new bull market for stocks. In a column, he shares five sentiment indicators that suggest it is time to buy stocks — especially this group of companies.
Time for a refreshing COLA if you are on Social Security
Getty Images
The Social Security Administration has announced that its cost-of-living adjustment (COLA) for 2023 will be 8.7%, the largest increase in four decades. There is more to the story, including tax implications and changes to Medicare, as Jessica Hall and Alessandra Malito explain.
Freddie Mac said interest rates on 30-year mortgage loans averaged 6.92% on Oct. 13, up from 3.05% a year earlier. Mortgage Daily said rates had hit 7.10% — the highest in 20 years — and economists are warning these levels could be a “new normal.”
A homeowner locked-in with a low interest rate on their mortgage loan will be reluctant to sell. And some would-be buyers may now be priced out of the market because of much higher loan payments. Here’s what economists expect for home prices in 2023.
This is why Florida’s insurance market is such a mess
Florida insurers are not only suffering from storm-damage payouts.
Joe Raedle/Getty Images
Hurricanes are nothing new to Floridians, but insurers in the state are losing money even though premiums have doubled over the past five years. Shahid S. Hamid, the director of the Laboratory for Insurance at Florida International University, explains why the Florida insurance market is so distorted.
Here’s a travel option you may never have heard of — home swapping
Villefranche-sur-mer on the French Riviera.
istock
Home swapping can give you an opportunity to live as a local in a faraway place while spending much less than you would as a tourist. Here’s how it works.
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The Long Island housing market is showing the impact of higher mortgage rates, as home sales and prices have declined.
There were 2,291 Long Island homes contracted for sale in September, down 19 percent from the 2,825 homes contracted for sale the previous month and nearly 22 percent fewer than the 2,931 homes that were contracted for sale in Sept. 2021, according to preliminary numbers from OneKey MLS.
Pending home sales in Suffolk County have now fallen for the last 16 months when compared with the previous year and pending sales in Nassau County have dropped year over year for the last nine months.
Long Island home prices are also retreating. The median price of closed home sales in Nassau last month was $699,000, the first time since May that the median price was under $700,000. In Suffolk, the median price of closed home sales last month was $550,000, down 2.7 percent from the $565,000 median recorded in August and the lowest median price since April.
Brokers attribute the sales and price declines to rapidly rising mortgage rates. The average rate for a 30-year fixed mortgage was 6.88 percent this week, according to bankrate.com, that’s double the rate from just nine months ago.
Meanwhile, inventory remains lower than a year ago. There were 6,778 homes—3,140 in Nassau and 3,638 in Suffolk—listed for sale with OneKey MLS as of Tuesday. That’s slightly more than the 6,760 Long Island homes that were listed for sale at the end of August, but 3.5 percent fewer than the 7,044 homes that were listed for sale at the end of Sept. 2021.
This week Freddie Mac said the average interest rate on a 30-year mortgage loan in the U.S. had climbed to 6.70% from 6.29% the week before and 6.02% two weeks ago. The average rate a year ago was 3.01%.
Would-be sellers who have low-rate mortgage loans are reluctant if it means they need to take out a new loan to fund their next home. Would-be buyers are forced out of the market, as the monthly principal and interest payment for a new 30-year loan, based on Freddie Mac’s figures, has increased 53% from a year ago.
Home-sale contracts are being canceled at a record pace in some areas.
The dollar has strengthened as the Federal Reserve has taken the lead among central banks in raising interest rates. This is reverberating across the world, making it more costly for countries to make interest payments on dollar-denominated debt and increasing the cost of any commodity traded in dollars.
The rising dollar lowers prices on imported goods for Americans and can also lower their international travel costs. But Michael Wilson, Morgan Stanley’s chief equity strategist, warns that earnings for the S&P 500 SPX, -1.51%
would decline as a direct result of the strong dollar and called the current foreign-exchange backdrop an “untenable situation” for the stock market.
This is what happens when bearish sentiment runs high
Michael Brush interviews David Baron, co-manager of the Baron Focused Growth Fund BFGFX, -0.76%,
who describes opportunities cropping up as institutional investors dump stocks. He also explains his winning long-term strategy, which has included a very long-term investment in Tesla Inc. TSLA, -1.10%.
When interest rates rise, bond prices fall. But it also means that if you have money to put to work, bond yields have become much more attractive.
Khuram Chaudhry, a European equity quantitative strategist at JPMorgan in London, makes the case for buying bonds now.
What about preferred stocks?
Getty Images/iStockphoto
Preferred stocks feature stated dividend yields and prices that move the same way bond prices do. That means prices for many issues are now heavily discounted to face value and that current yields are much higher than they were at the end of 2021. Here’s an in-depth guide on how to research preferred stocks and make your own selections.
Stanley Druckenmiller predicted a “hard landing” in 2023 for the U.S. economy while speaking at CNBC’s Delivering Alpha Investor Summit on Sept. 28.
Bloomberg
Stanley Druckenmiller predicted a U.S. recession in 2023 as a result of monetary policy tightening by the Federal Reserve. That may not be much of a stretch, considering that the U.S. economy contracted during the first half of 2022, according to revised GDP figures from the Bureau of Economic Analysis.
After the new U.K. government of Prime Minister Liz Truss announced a massive tax cut along with a new spending program to help counter rising fuel costs and new borrowing, the pound hit a new low against the dollar on Sept. 26 as investors and money managers panicked and sold-off U.K. government bonds. Steve Goldstein explains how and why the Bank of England came tot the rescue.
After Tesla CEO Elon Musk said the upcoming Cybertruck would be sufficiently waterproof to “serve briefly as a boat,” the San Francisco Bay Ferry offered this advice to patrons.
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