At the beginning of 2023, many experts predicted that home prices would dip at the end of the year. After months and months of sustained home price growth, it seemed inevitable that this would be the year where we’d see a small change in home prices.
However, 2023 hasn’t gone as predicted. With the Fed electing to raise the Federal Funds Rate four times already in 2023, mortgage interest rates have risen from about 6.5% at the beginning of the year to 7.5% at the time of writing for a 30-year fixed-rate loan. As a result of rising interest rates, many homeowners have decided to stay put, driving down inventory across the country. In markets like Long Island where inventory has been ultra-low since the start of the pandemic, it’s adding an extra challenge for buyers who still want and need to buy a home. For the most desirable properties, we’ve seen multiple offers and bidding wars return, which is continuing to push prices up, not down as experts predicted earlier in the year.
This scenario isn’t unique to Long Island. Now, leading real estate and economic experts have revised their national home price forecast for Q4 of 2023. Despite some differences in opinion, all are predicting that home prices will either hold steady or continue to grow through the end of the year! This is the official stance of Goldman Sachs, Morgan Stanley, and more. Zillow and the American Enterprise Institute are predicting the biggest gains in home price appreciation, with 5.5% and 6% respectively.
Where the Long Island Housing Market May Go from Here
While it’s still too soon for an official 2024 housing market forecast, there are a few different scenarios that could unfold to affect the Long Island housing market in the months to come.
The Federal Reserve is expected to meet three more times before the end of the year, with another meeting set for later in September. At the September meeting, the Fed is expected to raise rates again. That likely will bump mortgage rates just a little bit higher, though even a quarter percentage point change can make a difference for buyer affordability. It certainly won’t incentivize many sellers to list when they have a low mortgage rate locked in right now.
Still, other experts predict that we are nearing the Fed’s inflation target which has been what’s propelled them to keep raising the standard interest rate. Once we meet the target, the landscape will change. We could see interest rates start to drop a bit in 2024, though when is still unknown.
If interest rates come down, that might spur some homeowners into finally putting their homes on the market. More inventory would be a great thing for Long Island real estate. If inventory grows significantly, we also might see home prices come down in the next few years. However, any change is likely to be mild rather than drastic.
What does that mean if you’re a prospective seller or buyer on Long Island? As always, the right time for you to move is the right time to move. Right now, home prices are up so if you’re thinking of selling, you’ll likely get a great price for your property. For buyers, interest rates may be high right now, but you can always refinance in the future. In addition, as we move toward winter, there will be less competition for available homes which could make it easier to buy despite the tight inventory.
Whether buying, selling, or investing, the Pesce & Lanzillotta Team has the experience, negotiating skills, and record of proven success to help you make the most of today’s market conditions. Give us a call or reach out here to take the next steps.
The Pesce & Lanzillotta Team, at BHHS Laffey International Realty
Office: 516-888-9711
Email: info@pl-team.com
