With lower rates on the horizon, housing market eyes 2024 gains | Long Island Business News

For most anyone involved in the Long Island housing market, this year has been a real grind.

Hampered by higher mortgage rates and record low inventory, sales of Long Island homes in 2023 are the lowest in the last nine years.

But with mortgage rates beginning to recede and the promise of a lower-rate environment next year, there’s optimism for better times ahead.

So far, in the first 11 months of this year, there have been 21,125 closed home sales in Nassau and Suffolk counties, according to numbers from OneKey MLS. That’s nearly 23 percent fewer than the 27,381 closed home sales in the first 11 months of last year.

Brokers blame the slower sales activity on the paucity of available homes for sale. Listing inventory of Long Island homes has dropped to historic lows. There were 4,757 Long Island homes for sale with OneKey MLS at the end of last month, 21 percent fewer than the 6,021 homes listed at the end of Nov. 2022.

Increased mortgage rates have been dissuading homeowners from listing their properties since most would have much higher monthly payments on their next home. The lack of supply pushed home prices to record highs in 2023, with the median price of closed Nassau home sales reaching $720,000 in October and climbing to $600,000 in Suffolk during the same month.

“This past year has been brutal,” said Tom Pescuma, mortgage loan originator and team leader at United Mortgage in Melville. “My average first-time homebuyer in the last 10 years was looking at a $2,500 or $3,500 mortgage payment. Now, with the rates at some point in the year hitting 8 percent, my first-time homebuyers that are fresh out of school and just starting their second or third year of employment, they’re looking at like $5,200 mortgage payments for a starter house.”

Pescuma said that mortgage applications this year were down about 50 percent as compared with a year ago.

“Even when there is some inventory out there, and I might be able to qualify them, as far as everything else on top of that mortgage payment being so high, utilities and groceries, it’s just been a brutal year for buyers,” he said. “I’ve sent out so many pre-approvals, and people are still looking, but not many have pulled the trigger when they can find a home.”

Todd Bourgard, CEO of Brokerage Long Island, Hamptons and North Fork regions for Douglas Elliman Real Estate, acknowledged that the lack of supply has been one of the industry’s toughest obstacles this year.

“Certainly, getting new inventory has been one of the biggest challenges of the year across the board, and we have spent a lot of our time working on exactly that,” he said. “I always tell our agents that the best way to navigate a low-inventory market is to stay active and visible with their clients, and that’s what they’ve done to great success…I advise they reach out to anyone they’ve sold to in the last 10 years. If that client has been waiting in the wings, or is just starting to think about a move, you will be there, top of mind and ready to help them take that thought to the next step when the market begins to shift.”

And that shift may be coming soon. The news that Federal Reserve officials left interest rates unchanged in their last meeting and said they expect to cut rates three times in the coming year is a good sign for the struggling housing market.

“My crystal ball has been so cloudy for a while, but I think there’s a possibility that we’ve turned a corner, because I think that we’re now seeing inflation pressures starting to being mitigated, and we’ve seen the Fed take a pause,” said Richard Haggerty, CEO of OneKey MLS. “I think that’s having a positive impact on the market.”

Haggerty also pointed out that the pandemic-induced feeding frenzy and historically low mortgage rates that fueled greater-than-normal home sales activity in 2020 and 2021 had interrupted the market’s usual pace, causing an inevitable adjustment this year.

“Typically, real estate is pretty cyclical, and people make life decisions, whether based upon kids and schools, or retirement, or job changes, but COVID speeded all that up,” he said. “So instead of it happening at a natural pace, everybody was jumping into the pool…and that’s why the numbers just spiked in a way that we’d never seen before. So now that impetus is gone, and we’ve got to wait for things to kind of normalize, and then I think we’re going to see that cyclical nature again.”

And while mortgage rates may not drop to pandemic levels, Pescuma is welcoming their projected decline and stabilization.

“We were anticipating the rates to come down towards the end of this year and going into next year,” he said. “I think we’re going to be in great shape rate-wise next year, and I think that will help increase some inventory. People will start comparing where the new payment on a home isn’t going to be as significantly high as the current payment.”

Lawrence Yun, the chief economist for the National Association of Realtors, is also looking at a 2024 turnaround.

“The demand for housing will recover from falling mortgage rates and rising income,” he said in a NAR statement. “In addition, housing inventory is expected to rise by around 30 percent as more sellers begin to list after delaying selling over the past two years.”

Yun is also predicting that home sales nationally will increase by 13.5 percent next year and he expects home prices will remain largely unchanged.

Bourgard is also optimistic about business in the coming year.

“I do believe we will have a healthier and more active market to look forward to in 2024,” Bourgard said. “Interest rates will come down, allowing more inventory to come on the market. I think we will see some buyers who were priced out of the market this year because of the high interest rates come back to purchase. Similarly, buyers who became frustrated with bidding wars, who lost house after house and took a break from the market, will be back when the inventory comes.”

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