As the decade draws to a close, let’s take a look back at some of the housing challenges of recent years on Long Island and the outlook for the upcoming years.
Two big factors in housing prices are supply and demand. Too much supply and housing prices will plummet. Low supply creates scarcity. Low supply AND high demand results in bidding wars and increased home prices. If demand for houses in a certain area outnumbers the supply, housing prices will go up.
The housing challenges on Long Island have been a result of demand outpacing supply. This has resulted in the recent steady increase in home prices. Starter homes and trades ups have been the most sought after properties. Many buyers seek out neighborhoods with easy access to highways and the Long Island Rail Road (LIRR).
Why is there such low supply of houses for sale in Long Island? In many cases, older homeowners are electing to age in place. As their children choose to remain on the island, baby boomers are staying close to their families. With the high cost of daycare, many grandparents are able to provide the necessary help needed while taking the opportunity to spend valuable time with their grandchildren.
Another reason older people are staying in their original homes is tied to the high sticker price of a college education. Many college graduates return home to live with their parents out of necessity. Excessive student loans combined with few rental choices and high rental prices makes it next to impossible for new graduates to move out of the family home. If they are still living at home, their parents simply cannot downsize. Multi generational households gives the younger generation the opportunity to save their money to put a down payment on their own homes.
Another factor that is impacting the availability of houses for sale on Long Island is fear. Many homeowners are afraid that they do not have enough equity in their homes. The truth is that with the recent increases in home prices, comes increased equity. Homeowners who know they have equity in their homes are concerned about whether they should sell now when prices are high or if they should wait to see if prices continue to rise. While attempting to play the market, they are faced with the fear of losing out if the market turns. The truth is that continued increases in housing prices cannot be sustained. Housing prices cannot continue to increase indefinitely. That is simply not possible. Homeowners with equity in their homes who intend to sell in the near future should seriously consider the risks of reduced profit if they wait too long to sell. Those who are planning to sell in the near future should be looking to maximize their profits on the sale of their homes.
What is pushing the demand for houses on Long Island? Many of the buyers that are currently on the market are Millennials and the older Gen Zers. They have saved their down payment over the last few years of economic growth and are now ready to purchase a home. Many of the current buyers are from Long Island but many are also from the boroughs. The inflow of buyers from the boroughs are equalizing the sale of houses across the different neighborhoods of Long Island resulting in increased home prices island-wide. Many of the current buyers are not yet parents and they are purchasing starter homes with the plan of moving up later when their family structure changes. By buying now, they see the value in building equity in a home they own instead of paying high rents to build equity for someone else.
What’s the expected outcome? Well, for starters, we can expect that housing prices will NOT continue to increase indefinitely. If the economy slows down, then inevitably, so will housing prices. If the economy is stabilized, the expectation is that the real estate market will return to a healthy level. More homeowners will gain or increase equity, the supply of available homes for sale will increase enough to meet the demand. The result will be a more balanced housing market on Long Island.