Why Long Island remains a brutal market for homebuyers

U.S. homebuyers are starting to gain more clout when negotiating home purchases — just not on Long Island.

Long Island was the second-strongest seller’s market in the country in July, according to an analysis from real estate brokerage Redfin. 

Nationwide, the report found that sellers outnumbered buyers in July by about 36%, the widest margin since at least 2013, according to the report published last week. In certain markets in Florida and Texas, there were more than double as many listings as buyers. 

But the reverse was true on Long Island, with home shoppers exceeding the number of listings by 40.5%. Only the Newark metropolitan area, which includes six New Jersey counties, was tilted further in favor of sellers. Of the 50 most populous metro areas in the U.S. only five favor sellers, while 10 are considered balanced and 35 are titled toward buyers.

In a buyer’s market, homes take longer to sell, homeowners are more likely accept an offer at or below their asking price and they are more willing to negotiate on the terms of the deal, said Daryl Fairweather, chief economist at Redfin. Miami and Fort Lauderdale in Florida and Austin, Texas, had the strongest buyer's markets. 

Fairweather said Long Island's strong job market and proximity to New York City have fueled homebuyer demand, while new construction has failed to keep up.  

“Most markets across the country have turned into buyer’s markets, which is a shift from what the housing market looked like during the pandemic and even before the pandemic,” she said. "The places that turned into buyer's markets are places where there was a lot of new construction during the pandemic. There wasn't as much new construction in the Northeast and Midwest."

Long Island’s lengthy and expensive municipal approval process for new construction, rising labor and insurance costs and elevated interest rates have contributed to the region lagging other suburbs in homebuilding, said Mike Florio, CEO of the Long Island Builders Institute in Melville.

Builders “would line up around the block to build projects if they knew they could get the approvals done in a timely fashion,” Florio said. “I’m often told construction is probably the easiest part of the whole process.”

The report counted real estate listings to measure the number of sellers, but Redfin created an economic model to estimate the number of active buyers in a given area. Redfin’s economists used data on the probability a seller matches with a buyer each month, home tour bookings and the length of time buyers typically search before finding a deal to measure active buyers in a given area. 

'Competitive bidding'

Redfin’s findings match what local agents are seeing in the market, said Jennifer Cooper, associate broker at Daniel Gale Sotheby’s International Realty, who manages the brokerage’s offices in Huntington, Cold Spring Harbor and Northport.

“We are absolutely experiencing strong demand, limited inventory, competitive bidding — everything that points to a strong seller's market,” she said.

Cooper said homebuyers should expect to face competition this fall but to a lesser degree than in the past few years.

“The pace is slightly moderated from the frenzy of years’ past,” she said.

Given the level of competition, homeowners often don’t want to accept deals that are contingent upon the buyer selling their home before closing if they have other options, said Jennie Katz, an agent and president of Blue Island Homes in Bellmore.

She said she listed a hi-ranch in Bellmore in June for $895,000 that received multiple offers, and that the seller is in contract to receive $100,000 above the asking price. Buyers with less cash often have to make certain compromises to find a home they can afford.  

“You have to have realistic expectations, especially in areas where there’s just not that much inventory,” Katz said.

To give themselves the best chance, buyers should get prequalified by a lender and have funds ready to make an offer within a few days of a property hitting the market, Katz said.

Buyers shouldn't expect a major turn in their favor even if mortgage rates move lower this fall, said Redfin’s Fairweather. That's because lower mortgage rates could make homes affordable to a wider pool of buyers. 

“It’s hard to imagine, [Long Island] will return to normal when even in these circumstances, with rates being so high, there’s still so much demand relative to supply," she said.