What goes up must come down – and sooner rather than later is certainly the hope when it comes to soaring mortgage interest rates. While rates were at historic lows for most of the pandemic, current home buyers are not enjoying that luxury. Historically high inflation and recent decisions by the Federal Reserve have pushed interest rates up. Low inventory and high demand mean house prices aren’t falling either, and all of this is putting tremendous pressure on potential buyers. As interest rates continue to climb, we asked the insiders: how has this affected the Long Island real estate market? And what do they predict for 2023?
Gail Holman, Compass
“The current state of ever-increasing mortgage rates, strong demand and low inventory have combined into a tough market for home buyers. On Long Island in particular, we are seeing homes on the market become slightly ‘overvalued’. The main cause of the increase in house prices was low inventory and strong demand. Currently, the evolution of mortgage rates, which are record highs, has drastically slowed the number of applications. In the months Going forward, we can expect to see a slight easing of pressure on Long Island buyers as more homes come on the market and sellers see their homes stay on the market longer with fewer offers. Now is the time for sellers to revise their expectations. Buyers hungry for lower home prices are going to be disappointed. These drops won’t be serious. It’s safer to expect the market to stabilize and return to a pre-pandemic norm in 2023.”
Seth Pitlake, The Louise Pitlake Power Team, Douglas Elliman Realty
“Since interest rates rose a few months ago, we’ve lost our ‘stretch’ buyers – or buyers who used lower rates to buy more homes and those who were willing to ignore imperfections in properties just to be able to buy something, making the “as is” transaction the norm and fueling the urgency to buy mentality. As the market has changed, we don’t see the same buying pressure from our buyers, and they take longer to evaluate their purchase because they feel like they are not only paying full price for the product, but also paying a premium due to the higher interest rates. What to see in 2023 is that homeowners will need to ensure their properties are in pristine condition, as new buyers are more particular about their purchases and certainly more particular about what they expect for their dollars spent. value perceived for the buyer will be that he gets what he pays for on his terms, not the sellers! »
Alana Benjamin, Compass
“For the first time in several years, we are seeing great homes in “hot markets” across the North Shore going without offers for several days. This mainly applies to homes that need work or homes that are priced too high for current market conditions. Finding a home in a good sitting location in the market is really where today’s buyers can feel the market difference from earlier this year. This is an opportunity for buyers who have patience, vision and sometimes a willingness to renovate. On the other hand, there remains strong demand for “turnkey” homes, especially in the sub-$1 million to $3 million range. For these properties, there are still bidding wars, which can be hard to swallow for buyers who feel they should be able to pay less now that rates have gone up. I think we’ll see an active spring market as many buyers sitting on the sidelines will need to jump in and buy, especially those looking to enter school in the fall of 2023. Even with rising rates, a Mortgage is an easy way to stave off inflation, especially when rents are extremely high in feeder markets like Manhattan and Brooklyn. The truth is, we all need a place to live!
Amy Rosenberg, The Alexis Siegel Team and Amy Rosenberg, Douglas Elliman
“While rising interest rates are certainly a consideration for Long Island home buyers, the law of supply and demand is still a driving force. Inventory is very low and there is still plenty of serious buyers who have either lost homes in bidding wars or been deterred from even trying to buy due to soaring prices and pandemic-induced job and financial insecurity. I believe rising interest rates, combined with stabilizing house prices, will lead to a more balanced market in 2023; however, the market will continue to favor sellers due to low inventory and demand for Additionally, potential sellers who have refinanced at very low interest rates in the past two years may be hesitant to sell, as it is harder to justify downsizing when your monthly mortgage payment may remain. the same due to higher interest rates. Hopefully more properties will come on the market in early 2023, prices will stabilize and, despite higher interest rates, the intense buyer pressure felt during the pandemic should start to ease.
David Barkstedt, Team David Barkstedt, SERHANT.
“With the Fed raising mortgage interest rates to curb inflation, it’s important to keep in mind that today’s current rates are still competitive and low compared to the past 50 years, and that c is still the time to buy. To be a competitive buyer a year ago, you had to offer more than the asking price and give up contingencies to increase your chances of having your offer accepted. Now there are fewer people looking for a house, which decreases the likelihood of a bidding war For 2023, I expect rates to continue to rise until the Federal Reserve can stabilize inflation As a homebuyer, I would focus on my ideal monthly payment versus the interest rate An increased rate change for a few months does not drastically change your monthly payment In most cases it is still cheaper to own than to rent, even ow current rates. Other alternatives to explore include variable rate mortgages which tend to be half a point lower than a fixed rate mortgage. Economists predict that in 36 months or less, rates will drop and today’s buyers will have the opportunity to refinance at a lower rate.