In the second quarter of 2006, Long Island’s Suffolk and Nassau counties obeyed the pattern of increasing inventory that has emerged in many of the counties surrounding New York City, while prices remained relatively flat.
In Nassau, the median price of a home was $490,000 in July, unchanged from the same month of the previous year, according to the Multiple Listing Service of Long Island. In Suffolk, the median was up 2.5 percent to $410,000.
“What we’re seeing is that home price increases have flattened out considerably,” said economist Pearl Kamer of the Long Island Association of Realtors. “In the past five years, they were increasing at double-digit rates. I think we’re poised for selective price declines in certain markets, particularly in the high end.”
Kamer expects price declines for sales at or above $750,000, since that segment has a little more leeway for reduction than lower price points. She doesn’t expect to see things get worse at the lower end of the market.
“We still have very strong housing demand, particularly at the low level, anything $500,000 or below, so I don’t expect price declines there, at least not immediately,” she said.
Inventory increased in Nassau from 8,582 units in July of 2005 to 13,934 units in July of 2006. Suffolk increased from 6,000 in 2005 to 10,137 in 2006.
Long Island’s inventory “is up higher than in the city,” said Dottie Herman, president and CEO of Prudential Douglas Elliman. “When people have a lot to choose from, there’s no sense of urgency. It’s not a horrible market — it’s not depressed — but there’s no sense of urgency.”
Herman said the greater supply forces sellers to price their dwellings correctly. “Last year, you could put [your property] up for any number. If it didn’t make any sense, it didn’t matter, because there was no competition. At this moment in time, it’s not a seller’s market and it’s not a buyer’s market. If inventory continues to go up, it will be a buyer’s market.”
Kamer also said consumer spending on Long Island has slowed as a result of the colder real estate market. Sales tax revenues rose less than 1 percent in the second quarter compared with the second quarter of 2005. Over the past five years, rising home prices made consumers feel wealthier and they were more likely to spend. Rising prices allowed them to tap into the equity of their homes, providing disposable income. Now, with a slower real estate market, consumers spend less, Kamer said.
That dynamic won’t likely change soon.
“Home prices are returning to more realistic levels,” Kamer said. “I think the cool-down or slowdown will be gradual, as long as we have a full-employment economy, which we do.
“We have an unemployment rate around 4 percent,” she added. “As long as that continues, I think home prices won’t decline sharply.”