Like all of New York City’s satellites, Long Island is experiencing a deceleration in its residential market.
Faced with declining sale prices and a surge in inventory, brokers and analysts now see an end to the fast-paced growth of the past few years.
In the third quarter of 2006, each month in Nassau County saw prices decline compared to the same month in 2005. The median sale price of a home in October was $472,300, 5.5 percent lower than the $500,000 in October 2005, according to the Multiple Listing Service of Long Island. The median price in August and September was $495,000 in both months, a 1 percent decrease from 2005 in both cases.
Suffolk County saw prices decrease in October only, to a median of $390,000 from $400,000 in October 2005, a 2.5 percent change.
This year has been marked by a wave of new inventory hitting the market. Residential appraisal firm Miller Samuel listed 33,632 units on the market in Long Island for the third quarter. This represents only a 1.5 percent rise over the second quarter, but an over 50 percent increase from the previous year.
Economist Pearl Kamer of the Long Island Association, the region’s largest business group, expects a transition to more realistic housing prices, though they might not necessarily be affordable.
“What I expect to happen is a pull-off period, three to five years of gradual decline, maybe totaling 10 to 15 percent,” she said. She compared the real estate bubble to the stock market or technology bubbles, saying that prices should drop to more realistic levels, followed by a period of stability, and then prices will increase again at Long Island’s historical rate of 2 to 3 percent a year.
“The big question is whether a decline of 10 to 15 percent makes housing significantly more affordable on Long Island,” Kamer said, but she doesn’t think that will be the case. “Housing prices have doubled over the past five years, so a change of 10 to 15 percent will not bring it down enough for most potential buyers.”
In the year 2000, the median price in Nassau was $252,500 and in Suffolk, $190,000. Kamer remarked that even after a period of decline, prices will not have lowered to these pre-frenzy levels.
Long Island’s challenge, Kamer said, is to implement a strategy for providing affordable and more diverse housing to the workforce.
The current market is dominated by owner-occupied, single-family houses, but demographics are shifting to include more young couples without children and more seniors.
“We just don’t have an adequate mix [of housing types] for these demographic groups,” Kamer said.