Someone forgot to tell Long Island home shoppers the market was crashing.
Sale prices hit new highs and bidding wars were up in Nassau and Suffolk counties last quarter. Homes sold faster than they have in the more than two decades that Jonathan Miller has been tracking them, according to his latest report for Douglas Elliman.
More than half of all sales involved bidding wars, making the quarter the second-most competitive on record. Four of every 10 bidding wars were for luxury properties, a new high.
The numbers do not include the North Fork and Hamptons markets, which Miller reports separately because they are dominated by vacation homes.
But the takeaway from the data is clear: No price collapse on Long Island is evident despite rising mortgage rates, fears of a recession, and notions that home prices must fall after their pandemic explosion.
The median price of one- to three-family homes and condos sold last quarter was $620,000, up from $605,000 the previous quarter and $585,000 a year ago. The average price was $720,000, up from $703,000 and $693,000, respectively.
Available homes remain in short supply on Long Island, forcing buyers to compete. Inventory is at half of pre-pandemic levels, thanks to a period of low mortgage rates and pandemic-inspired home shopping that gobbled up listings.
“You had a lot of people scrolling Zillow all day,” Miller said. Inventory hasn’t bounced back because many homeowners now have low-interest mortgages and don’t want to sell if it means buying a new home at a much higher rate.
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On Sept. 30, the final day of the quarter, 6,241 Long Island homes were listed — an improvement over the record-low 4,280 three quarters ago but still about 20,000 fewer than in 2008, at the end of the housing bubble. That’s another reason prices don’t figure to crash like they did then.
With so little on the market, 57.4 percent of Long Island home sales last quarter were for above the last asking price, just off the record of 59.2 percent set the previous quarter.
“You’re looking at a fairly firm underpinning in terms of price,” Miller said. “In 2008, inventory was piled to the sky.”
Now, the caveats.
Sales in July, August and September represent buying decisions made in the spring, when mortgage rates were rising but still far lower than they are now. The average rate last week for a 30-year fixed mortgage was 7.16 percent, the highest since 2001. So home prices might well be leveling off, but it’s just not reflected in the data yet.
Rising rates typically push prices down, and although the shortage of listings has prevented that from happening, borrowing costs could go higher still. The inflation-obsessed Federal Reserve has pledged to continue pushing up interest rates, which usually brings mortgage rates along for the climb.
While price growth has buoyed homeowners, for the brokerage and mortgage industries, it has been a rough year because sales are down. And with contract activity off about 30 percent from a year ago, transactions could be even lower in the fourth quarter.
That said, Long Island sales were about the same as the third-quarter average over the past decade. Miller noted that annual comparisons are misleading because last year was such an anomaly.
“This is one of the few times in history that year-over-year [change] is skewed, because last year was a rocket ship,” he said.
The question now is whether that rocket will crash or parachute gently down to earth.
“Usually it’s 12 to 24 months before housing prices would see any significant correction, if any, because the sellers are waiting for their number,” Miller said. “And if they don’t have to move, they’re not going to sell.”