The dream of home ownership is one that is universally shared by just about every family on Long Island, but with the current economic climate being what it is, that dream is appearing to drift further and further out of reach for many. But hope always springs eternal, and with the assistance of a qualified and knowledgeable professional, you too can find yourself walking through the door of your very own home one day.
Artisan Mortgage Company is a wholesale mortgage broker in Bay Shore, NY, and according to President Jim Barry – who founded the company in 2005 – there are some serious hurdles that prospective homebuyers on Long Island are encountering these days, among them being the uphill battle the Federal Reserve is facing in its efforts to curb the country’s record-high inflation.
“The Fed’s been steadily raising interest rates now for 18 months,” Barry said. “They are hyper-focused on inflation, and their intent was that they were going to continue to raise rates until the economy cools. However, they have been unsuccessful in doing so, so they don’t really know what to do right now.”
Inflation is the number one issue with the economy right now, and with the Fed driving up rates, interest on 30-year fixed-rate home loans have ballooned to the point where many homebuyers are now paying an additional $1,000 or more a month to own a home than they would have just a few years ago.
“Last year at around this time, interest rates and home mortgage loans hovered around the 6 percent mark; currently, they are or more in the range of seven-and-a-half to eight percent, and that is putting many people off of buying homes,” Barry noted. “If you go back to 2021, that’s when rates started to move back up. People were getting 30-year fixed rate loans in the range of three percent, but we peaked pretty much close to eight percent a few weeks ago.”
With that being the case, Barry said that he would have expected the real estate market on Long Island to cool off; however, Nassau and Suffolk counties are seemingly bucking the national trend, with homes not only retaining but increasing their value amongst fierce competition from home buyers.
“It comes straight down to supply and demand,” he said. “Our demand is still strong, and supplies very limited, so people – even with rates in the mid to high sevens – are still bidding 30, 40, 50 grand over list price.”
Part of the reason why inventory on Long Island is so low, Barry noted, is because people who purchased their homes at a three-or-four percent interest rate are loathe to the idea of selling and acquiring a new home with an interest rate approximately double that, which would represent a significant upgrade to the cost of the money that they would be borrowing.
Another factor driving the unique Long Island real estate market is that the space here for home development is very finite when compared to many other areas of the country.
“Here, you’re not going to get a large national builder who’s going to come in and build a 500-home development,” Barry said. “You will see that happening in a lot of other parts of the country, but not here.”
While the outlook for many home buyers on Long Island may seem grim, Barry said that they shouldn’t lose hope, as he feels that the market will begin to stabilize in the near future and become much friendlier to those looking to purchase a home.
“I’m expecting that rates will start coming down soon, but if you buy today at a higher number, if you can tighten your belt and tough it out for the next year or two, and when rates come down, you’ll be able to refinance back to a lower interest rate and reduce the cost to own these homes,” he said.
However, another unusual aspect of the real estate market on Long Island is that homes are retaining their values at higher degrees than in other parts of the country; if you wait until interest rates are lower, what is the point if home values continue to increase during that time?
“Are you better off buying a home today at 600 grand with a higher interest rate and refinancing down the road, or if you wait a year and rates come down, but that $600,000 house is now $700,000?” Barry said. “But anytime you’re worried about inflation, your best investment is an appreciating asset, because your asset is going to appreciate in-line with some of the inflationary numbers.”
Barry noted that the housing shortage issue on Long Island is being addressed by the state government on down, and to that end, there has been a push to create new apartment buildings, especially in downtown areas throughout Nassau and Suffolk counties. In addition, he also pointed out that a lot of major lending institutions have loosened their restrictions on accessory dwelling units (ADUs) such as mother/daughters and basement apartments.
“These are ways that Long Islanders may be able to afford homes, utilizing these accessory dwelling units,” he said. “A lot of lenders are now allowing you to purchase a home that has an ADU, and you can qualify some of the rental income that you will potentially receive in that unit to help you to qualify for a mortgage. We recognize that these ADUs are critical to the housing stock and a lot of homeowners are relying on them to make their homes affordable.”
Ultimately, Barry said that he would love to see local municipalities relax their ordinances in order to allow residents to build two or even three-family homes, something that is fairly unheard of currently on Long Island.
“Some locals may push back on it, but this is a way for us to continue to create more housing and grow our market, especially when we’re limited on the available land we have,” he concluded. “We have to just continue to create quality housing for people to live in, whether they’re in a home with a mortgage or they’re renting a unit, they need to be available.”
To find out more, please visit https://www.artisanhomemortgage.com or call 631-859-9414.
