By Megan White
Editor’s note: Part two in a series on Long Island housing.
At the start of the coronavirus pandemic in March 2020, many people were terrified to be locked in their homes, particularly in cramped city apartments. This led to an influx of new buyers seeking to secure homes in the suburbs. Interest rates on homes plummeted to historically low numbers, and home prices, particularly for single-family houses, started to rise.
While the housing industry saw record prices during the pandemic, the housing market is now suffering the consequences. In the “post-Covid era, you have an increase in interest rates,” said Mike Slorio, CEO of the Long Island Builders Institute in Islandia.
Interest rates amid the pandemic dropped to as low as 2.5 percent, but now have risen to nearly 7% on a 30-year, fixed-rate mortgage. On top of high interest rates, Long Island’s current housing market is experiencing “more demand than we have supply,” said Bianca Esposito, a realtor with Vylla Home, New York.
Supply and demand
When there is low supply, homeowners are able to up their prices and buyers bid more. Long Island home buyers are commonly in bidding wars now.
With a high supply and low demand, the average price of a home drops. If everyone’s house is on the market at the same time, potential buyers have multiple options to choose from. They don’t necessarily have to choose the most expensive house to get the amenities they want.
Supply remains low not only from the effects of the pandemic, but also because the market is facing the largest buying generation since the baby boomers: millennials. There are more than 72 million millennials in the U.S., and they are now of home-buying age and starting to enter the real estate market, creating high demand.
“Millennials now make up 43% of home buyers – the most of any generation – an increase from 37% last year,” according to the National Association of Realtors.
The basics contributing to a home’s price are usually square footage, condition and location/neighborhood. The more square footage, the more expensive the home. The more recently a home was built, the more expensive it will be. A home’s amenities also drive up price.
“Location is the largest deterring factor of the price. The further from [New York City, the cheaper it is,”said Evan Lewitas, vice president of Center Island Contracting.
The price of plumbing, land and labor costs also increased during the pandemic. “Add up all those factors, it drives the housing price up. Everything is going up,” Slorio said, adding, “Land is more expensive. It’s more expensive for builders to develop.”
Land prices drive home values more than construction costs, at least on Long Island. “Although construction does not vary from town to town, land price can be drastically varied,” Lewitas said.
The type of home also plays a significant role in determining a home’s overall price. Historically, ranch homes were most valuable. Ranches, characterized by a single level and a widespread layout, tend to require more square footage, and with more square footage comes a higher price.
Housing trends now indicate people prefer split-level homes, according to Esposito. Split homes have an open flow, with more levels. Because split homes are built more vertically rather than horizontally, they tend to be the more affordable option.
Homes with basements will be more expensive than homes without. Basements add to construction cost because concrete and excavation require more money, explained Lewitas.
The housing market can also change throughout the seasons, so a potential buyer should understand housing trends on Long Island. “Spring and Summer are set seasons to be busy, while the fall is traditionally for residual buyers trying to rush in and buy,” said realtor Bianca Esposito. With the spring and summer being relatively busy, homeowners can demand higher prices during those seasons.
Construction and development also came to a slowdown after the Great Recession of 2008-09, contributing to today’s housing shortage and crisis. Many construction workers did not return to their jobs after the recession ended, leading to fewer homes being developed, explained Esposito.
“There are not as many good construction workers,” Slorio said.
When buying a home on Long Island, it is crucial to make comparisons between the two counties: Suffolk and Nassau. The U.S. Census Bureau reports that Suffolk has a larger population than Nassau. Suffolk’s population now stands at at 1,525,465, which exceeds Nassau’s population by 141,739. Suffolk’s larger population comes from the fact that it tends to be the more affordable county with lower property taxes, experts say. Nassau borders one of New York City’s five boroughs: Queens. Suffolk is on the eastern part of Long Island. Nassau is more expensive to live in largely because it’s closer to the city.
There are a few necessary things a potential buyer should understand before entering the market, according to Esposito. You should either already have good credit or be actively working to build good credit. It’s important to then understand how to own a home, how to budget, how to build equity, and how to refinance or sell later on.