As the year ends, prices remain firm along with low inventories
As this crazy year winds down with lifting pandemic restrictions and the coronavirus (hopefully) in retreat, the real estate market on the North Fork remains strong — even though other markets across New York State and the nation are showing signs of “softening.” According to the most recent housing report released in September by the New York State Association of REALTORS®, the demand for homes continued to exceed supply and the number of houses sold increased for 12 consecutive months in year-over-year comparisons, despite continued low inventory. Additionally, data company Redfin recently reported that more than 50% of residential real estate transactions for 2021 were cash sales — meaning there was no home loan associated with those sales or the mortgage contingency was waived. That’s the highest percentage of cash transactions since 2009. Mortgages are also at historically record lows, with interest rates for 30-year fixed rate loans below 3%.
As we head into the new year, Zillow projects a positive home-price outlook extending through the summer of 2022, predicting that home values in the U.S. will rise by 11.7% between now and early fall of 2022 — as opposed to the 20% increase the data company projects by year end 2021. In their latest “Economic and Housing Outlook” published in September, researchers from Fannie Mae pointed to a “softening” of sales from the fourth quarter of 2021 leading into 2022, stating that “…other indicators, such as purchase mortgage applications and pending home sales, which lead closings by 30-45 days on average, point to near-term softening…We believe home purchase demand is cooling somewhat as the housing market normalizes.” Furthermore, this Fannie Mae report adds that lack of inventory is a major roadblock to housing sales.
So, what can we expect on the North Fork as 2021 wraps up and we move into 2022? “Softening” is not a term that Tom McCloskey, licensed associate real estate broker at Douglas Elliman in Cutchogue, thinks is applicable to this market. “Prices are still firm,” states Tom, “and we anticipate that for another 6 months at least. There are fewer transactions, which is a function of no inventory. Buyers are not able to find what they want and don’t want to compete in a bidding war so they are stepping away from the market. It’s not a true ‘softening’, which is reflective of red flags in the economy, which we are just not seeing right now.” Tom pointed to the latest Elliman Report for September 2021, which shows double digit declines compared to September 2020 across all price points: -25% for new contracts and -61.5% for new listings. The report’s takeaway about the North Fork market: “Comparisons against last summer’s post-lockdown new signed contract book have distorted trends combined with the inability of new inventory to keep up have restrained sales. As a result, newly signed contracts…have declined year over year for the past four months.”
Diane Mollica, real estate associate with Daniel Gale Sotheby’s in Mattituck concurs, explaining that while the North Fork real estate market has slowed down, demand continues — for the right property. “Right now, the market is more reserved,” comments Ms. Mollica, “but it’s holding its own. There are discussions in Washington about interest rate and tax increases; once we have a clearer picture about this, I expect the market to pick up a little bit. In the meantime, even though it’s slower than summer, as soon as good property comes along it gets picked up immediately.”
Sheri Winter Parker, licensed associate broker with Corcoran in Cutchogue, does not see any market softening. “There’s a need and there’s a demand — a demand that needs to be met. The market is not softening at all. Right now, the demand is a function of price and availability of product. And there’s a lack of product,” Sheri goes on to discuss that there’s very little inventory under $2 million. “We were doing well before, but Covid took it to another level.”
From Sheri’s perspective, the lack of inventory is driving the sharp pricing increase over the past year — and she’s not seeing that buyers are being put off by that pricing for very long. “The lack of inventory has caused pricing wars, with many properties seeing multiple offers over asking price. But in the end, the price has to make sense,” explains Sheri. “Buyers do walk away, I have seen that more than once. But when those buyers realize that there’s nothing else to buy, they come back.”
So what’s the takeaway? Sheri Winter Parker is pretty clear about it. “The market just has not stopped. I see the year finishing really strong.”