Long Island’s home prices hit a record high during 2020. Suffolk County saw an increase in home prices of 18% while Nassau County saw an increase of 12%.
According to the latest CoreLogic Home Price Insights Report, nationwide, home values increased by 8.2% over the last twelve months.
This significant rise in home prices was a direct result of low inventory combined with strong buyer demand and historically low mortgage rates.
As CoreLogic explained:
“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.
While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”
Where will home prices be in 2021?
Supply and demand will continue to be the determining factor in home prices in 2021. If the current imbalance in supply and demand continues, Long Island’s home prices can be expected to continue to rise. However, the rise in home prices is not expected to be as meteoric as it was in 2020. Even with prevailing low interest rates, Long Island’s economy cannot sustain an additional steep increase in home prices during 2021.
An Increase in Housing Supply is Expected on Long Island during 2021
According to the National Association of Realtors (NAR), on a national level, we are entering 2021 with approximately 370,000 fewer homes for sale than a year ago. Long Island’s housing market has also seen a fall in inventory in 2020. However, a shift has been detected that is expected to increase inventory in 2021.
- As the end of the pandemic appears to be in reach, and the deadly grip of fear overshadowing our existence dissolves, the expectation is that many homeowners who were forced to put their plans to sell on hold, will now move forward.
- The financial fallout from the pandemic will force many homeowners who are not able to refinance or catch up on their mortgage payments to sell their homes.
- Many homeowners are now among the unemployed and unable to find jobs that can sustain their current financial responsibilities.
- A year of working from home in tight quarters, sadly, may result in an increase in the divorce rate, further fueling the sales of homes.
- Many Long islanders are looking to move up to bigger homes with more workspace which would require them to sell their current homes.
The pandemic created a fear that has resulted in crippling the housing inventory on Long Island. Many Long Islanders who wanted to sell, felt they had nowhere to relocate to, as the disease was so widespread. In addition, travel bans restricted their mobility effectively making it impossible for them to sell their homes. They hunkered down in their homes unable to make a move. Still, others simply did not want to be in contact with strangers who could potentially infect them with the disease, so they refused to put their homes on the market. The effect was a tightened supply of homes available for sale.
Housing Demand in 2021
Buyers, largely comprised of city dwellers, renters who suddenly needed a larger living space to suit emerging needs and others who saw the value in homeownership took advantage of the low interest rates and came out in droves. The resulting effect was a significant rise in Long Island’s home prices. With low mortgage rates, the demand for houses on Long Island is expected to continue its upward trend. Although mortgage interest rates may see an increase in 2021, it is not expected to be significant enough to disrupt buyer demand.
According to Greg McBride, Chief Financial Analyst for Bankrate:
“As vaccines become more widely available and a return to normal starts to come into view, we’ll see mortgage rates bounce off the record lows.”
Low mortgage rates are beneficial for homebuyers, and home sellers alike. The low cost of financing allows buyers to increase offers while still being able to meet mortgage qualifications. In addition, in most cases once a homeowner sells a home, they buy another home in which to live. With money being so cheap, many will opt to forego using cash gained from the sale of a home and use a mortgage to finance the purchase of their new home. Access to low mortgage interest rates is a major reason why demand is expected to remain high throughout 2021.
Prominent real estate analysts forecast that nationally, home prices will continue to rise in 2021 but at a slower pace than it did in 2020. This also holds true for Long Island’s home prices.
Here are their forecasts:
Expectations for 2021
As we look towards 2021, we expect to see an increase in inventory, continued buyer demand combined with low interest rates. Long Island’s home prices will continue to rise but not as dramatically as they did in 2020.