The following was first published in The Real Deal’s November 2019 Tri-State Edition. You can read the original here.
As entry-level homes fly and luxury listings linger, the middle markets in Nassau and Suffolk are feeling the squeeze
By Richard Murdocco
Melanie Mazzeo, a Douglas Elliman agent who sells mostly within the Harborfields Central School District in Huntington, said she recently closed on a four-bedroom ranch house on Suan Court for $779,000 — roughly 7 percent over the asking price.
That came on the heels of five strong offers that drove up bids, she noted.
Buyers across Nassau and Suffolk looking to upgrade from entry-level homes purchased just a few years ago are diving into much shallower pools. Long Island’s middle markets — homes priced above the average regional sales price of about $570,000 and below the $1 million mark — are feeling the squeeze as entry-level homes get gobbled up by eager buyers and luxury listings sit on the market for months.
Insiders told The Real Deal that homes in the middle price tier continue to see spikes in demand on top of major supply shortages. And the latest chatter about a weakening U.S. economy has done little to slow pricing growth, with perpetually low interest rates further fueling buyer appetites.
Mazzeo said buyers in Suffolk’s Greenlawn area are increasingly looking at pricier homes and getting multiple pre-approvals for bigger mortgages as rates continue to drop. “When you don’t have a lot of inventory, buyers want to open up more doors,” she noted.
At the same time, both median and average sales prices in Nassau and Suffolk are on the rise, up 4.2 percent and just under 1 percent respectively from last year, data from the Multiple Listing Service of Long Island shows.
Locally, buyers favor the more affordable eastern townships in Suffolk, where pricing has grown by 6.7 percent since 2018. Nassau has seen a more modest year-over-year pricing growth at 1.7 percent.
Those gains are part of an ongoing trend. The Long Island MLS reports that prices have been growing for more than two years in Suffolk and more than four years in Nassau.
“The lower the price segment, the higher the price growth and tighter the inventory,” said Jonathan Miller, president and CEO of the Manhattan-based appraisal firm Miller Samuel. The middle in Nassau and Suffolk isn’t “a standout,” he noted, “mainly because it’s between an overperforming starter and underperforming luxury tier.”
Brokers say the few remaining parts of Nassau and Suffolk with top-performing school districts and homes priced for a wide range of buyers — including Greenlawn, Syosset and Plainview — are driving up demand.
Lenny Rosenfeld, an Elliman associate broker in Plainview, located near Nassau’s eastern border, said the area’s average asking price is around $650,000, with prices going well north of the $1 million mark on some of the newer homes.
“Schools are a major selling point here,” he said. “A lot of the people who grew up in the area want to move back because they like the school district and it’s relatively affordable.”
But those scattered pockets are quickly filling up, according to multiple sources.
In the parts of Nassau that lie south of the Gold Coast and straddle the Long Island Expressway, for example, buyers are coming from both east and west, adding additional pressures.
“For buyers who want to upgrade, there is nowhere to go — especially if they don’t want to uproot their kids from the district,” said Robyn Schatz, an agent with Signature Premier Properties who’s been selling on the Island for close to 10 years.
Schatz noted that overall supply remains low within the Dix Hills area she covers in Suffolk, while the area’s middle market is exceptionally confined at $700,000 to just under $1 million.
A September report from the Long Island Board of Realtors further substantiates that. “The lack of affordable inventory and the persistence of historically high housing prices continue to impact the residential markets in both Nassau and Suffolk,” according to the study.
The report also notes that 30-year mortgages have hit their lowest rates since 2016, with average interest rates for a fixed mortgage hovering around 3.6 percent. Overall, rates are down nearly a full percentage point from last year.
“Thanks to lower rates, you have buyers that were looking in the $700,000s who can suddenly move up to the high eights or nines,” Schatz said.
The Millennial Rush
Linda Cawley, Schatz’s business partner, who’s been in the brokerage business for more than 20 years, said a property’s curb appeal and overall condition typically make or break a sale for those looking to upgrade — especially for millennial homebuyers.
Schatz cited two young families who moved into turnkey homes in the Half Hollow Hills Central School District, a top Suffolk performer in academics.
“Millennials who grew up in these communities are now paying top dollar,” she said, adding that “buyers who thought they’d live further west in Nassau are getting more value in Suffolk.”
The changing preferences of millennials are finally beginning to influence the housing markets in Long Island and beyond. Large cities across the country have lost tens of thousands of millennial and younger Gen-X residents in the last year, according to U.S. Census figures first reported by the Wall Street Journal.
New York City lost nearly 38,000 people between the ages of 25 and 39 in 2018 — roughly double the annual losses the five boroughs experienced over the previous three years. That loss was part of the city’s first overall population decline in more than a decade.
And Census data suggests many of those leaving the city are crossing the bridges and tunnels to the suburbs of the east, with more millennials calling Long Island home in recent years.
In fact, economists for the Long Island Association, a regional business advocacy group, estimate that by the end of next year, Nassau and Suffolk will have recovered from the loss of young professionals both counties have seen since 2000.
Millennials are “a bit late in venturing into the for-sale market than prior generations were,” Miller said, noting that many are conservative about taking credit risks after witnessing the recession firsthand.
But millennial buyers are starting to shake up home sales in Long Island and other areas outside the city, he added.
“They’re going to be a powerful force in the market over the next decade,” Miller said. “We’re starting to see that transition.”
What Goes Up…
Ann Conroy, Elliman’s Long Island Division president, said she usually cautions against painting the housing markets in Nassau and Suffolk too broadly and noted that she’s seen unique buyer patterns emerge in different middle-tier communities
“It depends on the market,” Conroy said. “For example, $700,000 in Manhasset is a bargain for a first-time homebuyer. In other areas, that’s the high end.”
But one of the biggest shifts overall in recent years, she added, has been the rate of homeowner turnover. “It used to be that the average person would stay in their home for five to seven years,” Conroy said. “Now, it’s all over the place.”
Mara Navaretta, who runs her own brokerage covering Syosset, Jericho and parts of Plainview, said another big change has occurred with foreign buyers.
“For a while, the market was dependent on money from China,” she said of Jericho in particular. “The big change for 2019 is that we’ve seen as much as a 10 percent dip in prices because the cash buyers from China have essentially disappeared.”
Anthony Napolitano, who runs a boutique brokerage in Massapequa Park that covers most of Long Island, said that he’s starting to see a gradual shift to a buyer’s market overall.
Napolitano indicated that low inventory levels have been artificially propping up pricing while the lack of supply has delayed price cuts up to this point.
“Manhattan has been a buyer’s market since around June, and since then it’s trickled into Queens and it’s about time we’re getting hit,” he said. “The limited inventory is making it a seller’s market, but prices are coming down a bit and things are sitting on the market longer. Long Island is on the cusp.”
Rosenfeld, who has more than 20 years of experience selling on Long Island, echoed that sentiment and maintained that the middle markets in areas like Plainview won’t always be this hot.
“Right now, if a home is priced right, it’ll sell because it’s still a good market to buy,” he said, calling current interest rates exceptional. “But things can’t keep on going up and up.”