Long Island’s Real Estate Reality Check: How Fluctuating Markets Effect Your Wallet

The Long Island real estate marketplace saw a roller coaster of fluctuations in recent years, and no matter whether you're a buyer, seller, or an investor, it's long overdue for a reality check. With rising mortgage rates, shifting inventories, and changing buying behavior, the marketplace is a whole lot different today than a few years ago. Regardless of your role – a seller worried about whether it's time to sell, a buyer frustrated with sky-high price tags, or an investor looking for your next move – below is what you need to know about how shifting trends in the marketplace will impact your pocketbook.

Home Prices: Sustaining a Decline, but High

After years of double-digit price spikes, Long Island’s housing market is at long last starting to slow down—but don’t bet on a quick price drop. According to new data from the **Long Island Board of Realtors (LIBOR), Suffolk’s median price is at $620,000 and Nassau’s at $700,000. That’s an annual gain of 3.2% and 2.8%, respectively. That’s down a notch from the 15-20% annual spikes during the pandemic, but affordability is still a big issue, with the Long Island affordability index at its 20-year low.

Mortgage Rates: The Changer

If you’re wondering why housing values aren’t dropping as much as one might have anticipated, look no farther than mortgage rates. Those days of **3% interest** are a long, long gone, with current ones at roughly **7.1% for a 30-year fixed** according to **Freddie Mac**. That’s an added **$1,200 a month** for a $500,000 mortgage compared to three years ago. Higher rates have priced out a lot of buyers, with them having to **downsize aspirations** or **wait and see**. For sellers, that’s fewer bidding battles and a longer time in the marketplace, with average days in the marketplace at 54, an improvement over 32 a year ago.

Inventory: Higher Home Supplies, but Not Enough

The good for buyers: There actually are more homes for sale. Active listings in Long Island have increased **11% year-over-year**, but overall inventory is still **30% below pandemic times**. Most potential sellers are holding onto property in anticipation of not having to switch out their 3% mortgage for today’s 7%, a lock-in effect,   according to professionals. That lack of availability is holding down price drops, keeping competition in many communities afloat. Huntington, Smithtown, and Northport remain three of the most competitive communities, with property sales over asking price.

Luxury and Waterfront Properties: An Alternative View

While the overall marketplace is slowing down, **Long Island’s high-end and oceanfront property remains in demand**. High-net worth buyers, many of whom pay in cash, are less sensitive to rising interest rates. Oceanfront property in **the Hamptons, North Fork, and Gold Coast areas** continues to sell for full price, with values rising **8-10% year over year** for a lack of availability and high demand. The average price for a Hamptons oceanfront property stands at **$2.8 million**, and high-end sales remain commanding multiple bids even in a slow overall marketplace.

Renting and Buying: Affordability Issue

If you’re not ready to buy, renting might not be the easier option you think. **Long Island rental prices have surged by 10.2% in the past year**, with the average **two-bedroom apartment renting for $3,450 per month**. With rental inventory remaining tight, many renters are facing **stiff competition and bidding wars**, similar to the homebuying frenzy of 2021. The **rental vacancy rate on Long Island is just 3.5%,** one of the lowest in the state. For some, buying may still be the smarter long-term financial move—even with higher interest rates—considering **rents have outpaced wage growth by 20% in the last decade**.

What It All Means for You

If you’re a **buyer**, expect increased availability in the marketplace, but higher mortgage rates mean price will nevertheless remain a problem. Sellers have acquired negotiation bargaining power, with them providing **concessions such as closing cost credits or mortgage rate buydowns** in a bid to win over buyers. As a **seller**, getting your property competitively priced is critical—overshooting takes an eternity, and price drops become a norm. Well-presented property in high-desire locations continues to sell in a matter of days, but bidding contests have cooled down immensely. As an **investor**Long Island’s rental market continues to boom, and multi-family buildings present a sound opportunity. That being said, higher lending costs mean that **cash buyers have an edge** in closing deals. Familiarity with these trends will stand you in good stead in terms of positioning yourself in the marketplace, buying, selling, or investing.

Final Thoughts: Wise Planning for Next Step

Long Island’s real estate isn’t in shambles, but it’s transforming, for certain. Buying, selling, investing – whatever your position, having an awareness of these trends can inform your **sophisticated, thoughtful financial decisions**. Keeping in touch and riding with the times is important, even in a transforming marketplace. Affordability is a problem, but for insiders and with a dash of smart planning, opportunity waits.

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