Feeling the Pinch: High Home Prices, Inflation Hit Long Island Real Estate

0

For six months, Sandra Bryan and her husband, Neil, have been looking for a home to buy before August, when they are due to vacate their rental home in Huntington.

Their $450,000 budget would have been considered healthy two years ago for the neighborhoods they’re considering on the South Shore of Suffolk County, but they’ve had a hard time finding a three-bedroom home.

“We had a lot of roadblocks,” Bryan said. “We bid, then someone else bids more than us.”

The stress the Bryans are feeling is just one kind of squeeze that homebuyers face as they also have to deal with rising interest rates and inflation.

Neil and Sandra Bryan at the house in Huntington which they are renting and are due to vacate in August. Their efforts to buy a house were frustrating.
Credit: Morgan Campbell

Long Island home prices hit record highs in May, with the median sale price in Nassau County reaching $686,000, 8% higher than the May 2021 median and the median Suffolk sale price reaching $555,000, or 11.2% more than a year earlier, according to OneKey MLS.

And the combination of higher house prices and higher interest rates – mortgage rates soared to 5.91% last week – means people are paying more for their monthly mortgage payments than a year ago. .

All of this comes as inflation recently hit a new 40-year high of 8.6%. Americans are feeling the pinch as the price of groceries, gas, lumber and paint have skyrocketed and are looking not only for ways to save by postponing a vacation or a haircut or by buying a new car, but they’re also postponing home repairs and renovations on homes.

High inflation and future expectations that inflation will be high have led to higher mortgage rates, which means Long Islanders who buy a home now will have higher monthly payments.

Postponement of repairs

As the owner of a home improvement business, Chuck Mastro would usually have no problem fixing up his mother-in-law’s summer house in Hampton Bays that he’s trying to sell, but the cost of materials is “ridiculously swollen right now,” he said.

“At one point we were thinking of replacing the shingles with vinyl siding, but after COVID the prices for everything skyrocketed so we decided against it,” said Mastro, 59, owner of Talex Home Improvement of Roslyn Heights. . Instead, he will replace the old shingles and repaint the exterior.

The cost of plywood to replace rotting subflooring at another job site: $200 instead of the usual $75, he says. Filling his truck with gas used to cost $75 and now it costs $130. And although the cost of lumber fell in May to $651 per 1,000 board feet from a high of $1,329, according to NASDAQ, it is still higher than it was before. the pandemic.

“Most people understand what’s going on” when quoting a price for a project, Mastro said. “Let’s hope things calm down, but who knows, things are crazy right now.”

Stephen Zappalla, an agent for Keller Williams Realty in Suffolk, said a seller, faced with a quote of almost $250,000 to add a skylight and do a kitchen renovation, decided to hold off for now .

And the high cost of renovations has caused some sellers to change their minds about putting their homes on the market, Zappalla said, compounding the low inventory problem.

James Hogan, an agent for Daniel Gale Sotheby’s International Realty in Westhampton Beach, said homeowners are opting for small touches, like painting, ditching larger renovations they did at the start of the pandemic. “I don’t see people emptying kitchens, unless they’re turning houses over,” he said. “I think we’re back to pre-pandemic levels of small repairs.”

Higher interest rates

Joyce Coletti, a Douglas Elliman real estate agent in Long Beach, said her buyers are mostly first-time homeowners who have a problem with rising interest rates.

“What I see is a complete change in the market from last year,” she said. “Everyone was buying. Everybody.”

Rick Moro, a 50-year-old engineer, recently bought a house in East Atlantic Beach for around $800,000 and just listed his house in Long Beach.

“When I found this new property, I saw interest rates go up three months ago, and in one month they went from 3% to 4%,” he said. “If I hadn’t locked myself in a month ago, it would have affected me a lot.”

Last year he co-signed a loan with his two daughters in their early twenties to buy a house in Lynbrook. They had no money to buy themselves, and instead of renting or staying home, he helped them when interest rates were much lower.

Kelly Knowles and Al Stoliarov have postponed their wedding because...

Kelly Knowles and Al Stoliarov postponed their wedding as they looked for a house.
Credit: Howard Simmons

Fixed price

“More people are being shut out of the market,” said William Jacobs, an agent for Keller Williams Realty Greater Nassau. “They qualified six months ago, now they can’t afford it.”

Inflated prices hurt buyers in the middle and lower income brackets, those with budgets under $600,000. “They have the rude awakening that the payment will be additional to what they were paying six months ago,” he said.

“More people are being shut out of the market,” said William Jacobs, an agent for Keller Williams Realty Greater Nassau, shown in a home he lists in Elmont.
Credit: Danielle Silverman

Kelly Knowles, a dental assistant, and her fiancé, Al Stoliarov, an electrician, have postponed their wedding after eight months of fruitless house hunting in the West Babylon and Lindenhurst areas, where each lives with their parents.

They are looking for between $450,000 and $500,000, a budget they were optimistic about when they started their search. But a two-bedroom house near her parents in West Babylon entered a bidding war that sold for $30,000 above asking, or around $500,000.

“It was ridiculous,” Knowles said. “This house was probably under $300,000 in 2019.” They moved their search to Centereach and Selden.

Even with their combined income, which she gave between $160,000 and $180,000, buying a home is “going to be very, very tight,” she said. “I feel extremely stuck. I’m 33, he’s 34, and at this point, living on Long Island is nearly impossible.

“Because of rising interest rates, buyers are losing purchasing power,” Zappalla said. “We see that every day in this market.”

A buyer approved for a $500,000 loan six months ago with an interest rate of 3% may now see it drop to $450,000 with an interest rate of around 6% because he doesn’t is approved only for a certain debt/income ratio. Lenders generally say that the ideal debt-to-income ratio should not exceed 28%, or 36% including all expenses, according to Bankrate.com.

“Deals died that were under contract,” Zappalla said.

He advises buyers to speak to their loan officers to have their numbers rechecked every month or so. “You don’t want to make an offer and you find out you’re no longer approved because interest rates have gone up,” he warned.

For the Bryans, their home search is even more frustrating as they grapple with rising home prices as well as the family’s FHA loan, a mortgage insured by the Federal Housing Administration, which has deterred some sellers. With an FHA loan, properties cannot exceed certain price caps, a problem in a highly competitive and inflated housing market.

Sellers told them they were going with a buyer with a conventional mortgage or a cash offer.

“It’s like a frantic race,” said Sandra Bryan, 54, a medical biller and coder, who emigrated from Jamaica a decade ago with her husband, 47, who works in technology. information. “We’re ordinary, hard-working people – and we’re almost homeless.”

They have rented a house in Huntington for about five years with their adult children and have searched Huntington, Deer Park, Lindenhurst, Bay Shore, Wheatley Heights, Babylon, Amityville, Massapequa, Farmingdale and beyond. It would be the first time they would buy a house, something that would “really change our lives,” Bryan said.

The Bryans are planning a move, but have yet to...

The Bryans are planning their move, but haven’t found a house to buy yet.
Credit: Morgan Campbell

Share.

Comments are closed.