The number of homes for sale on Long Island has dropped and remained down over what it has been in recent years nationally. The market has nearly twice the demand and two-thirds of the supply. Inventory of homes are now at their historic lows. The rise in the number of people who can now work at home has also sparked a suburban boom and the scarcity of undeveloped land on Long Island means that builders could be unable to meet the rising demand and home prices could continue to rise this year. We know that Long Island’s housing market is booming because of outbound migration from New York City. The pandemic has caused many citi-dwellers to search for homes in a different area than the city.
Various surveys and industry chatter indicate that interest in rural areas and suburbs is up and interest in urban areas is down. Especially in NYC. Long Island is hot and is totally a sellers’ markets right now while the pandemic has increased the desire for houses with more space and a yard. Couple that with record-low interest rates, and prices are rising dramatically all over the country not just here on Long Island. The combination of demand and the low mortgage rates has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers. While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition.
Personally, I believe the housing market will remain strong and is set to break more records in 2021.
Home Buyers are eager to spend more on housing in 2021, as the economy continues to slowly recover from the pandemic. Strong growth is expected in 2021 for housing sales, rents, and home prices. A report from the Federal Reserve Bank of New York found that the median household expects to increase their spending by 3.7% in the next twelve months, the most optimistic outlook since 2016. This time the housing market is largely being driven by two factors: a shortage of available housing inventory and extremely low-interest rates.
Double-digit annual growth in both list and sale prices show an extreme lack of inventory and incredible demand. The housing market is still hot, but we may be starting to see rising home prices hurting affordability, for a few, but mortgage rates are continuing to drop. Despite a full percentage point decline in rates over the past year, housing affordability has decreased because the effect of lower mortgage rates (for buyers) is being evened out by double-digit home price growth.
With supply-constrained and demand boosted, house prices seem to rest on solid foundations for next year. They are likely to hold up even if there is a decline in transaction activity in the winter months. As new inventory comes on to the market. they are quickly taken out of the market from heavy buyer competition. Therefore, housing units are still in short supply with unsold inventory sitting at a 2.7-month supply at the current sales pace.
Sales of existing home sales are at an all-time high but new home sales have also risen during the pandemic. Those sales are allowing builders to raise prices. Buyer traffic is converting into sales at a record rate. According to Urban Land Institute, real estate market conditions and values in the U.S. are expected to rebound in 2021 and trend even higher in 2022, with single-family homes outperforming other sectors such as commercial, retail, hotel, and rental.
New single-family construction starts will fall slightly to 871,250 in 2020 before rising to 940,000 in 2021 and 975,000 in 2022, the highest level since 2006. In the meantime, home prices will grow an average of 4.1% over the next three years, above the long-term average of 3.9%, according to the report, based on a survey of 43 economists at 37 leading real estate organizations. Till the time coronavirus pandemic exists it will lead to a see-saw recovery with ups and downs.
To help borrowers at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) has extended the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least January 31, 2021, giving relief to more than 28 million homeowners with an Enterprise-backed mortgage.
While there was a decline in foreclosures, the housing markets where people are moving from urban areas to the suburbs – like New York City, Chicago, and Miami – were among the markets with the highest levels of foreclosure actions. Florida, Illinois, and Oklahoma post the highest state foreclosure rates.
Nationwide one in every 13,581 housing units had a foreclosure filing in November 2020. A total of 5,256 U.S. properties started the foreclosure process in November 2020, down 13 percent from last month and down 79 percent from a year ago. While foreclosure starts are down in many states across the nation, a few states did see monthly increases in foreclosure starts in November 2020, including Missouri (up 18 percent), Indiana (up 14 percent), Georgia (up 4 percent), Arizona (up 1 percent), and Texas (up 1 percent).
Among metropolitan areas with a population greater than 1 million, those with the greatest number of foreclosure starts in November 2020 were New York, NY (454 foreclosure starts); St. Louis, MO (208 foreclosure starts), Chicago, IL (207 foreclosure starts); Miami, FL (151 foreclosure starts); and Los Angeles, CA (147 foreclosure starts). Lenders foreclosed (REO) on a total of 2,010 U.S. properties in November 2020, down 22 percent from last month and down 86 percent from this time a year ago.
Is a Crash Coming in 2021? I doubt that will happen on Long Island but the National housing market continues to play an important supportive role in the country’s economic recovery. Current economic conditions resemble a “swoosh” pattern, with the initial impact from the lockdown followed by a gradual recovery as the economy reopens. So as long as there are restrictions on foreclosures, those interested in the cash for keys opportunities will just need to wait. Mortgage rates and slow but steady improvements to the job landscape continue to propel confidence for first-time buyers. The pace of existing-home sales has jumped to a level not seen since 2006 and, importantly, was followed by strong pending sales, purchase mortgage applications, and construction data.
Demand for rental units is expected to surge in 2021. While rising rents is a good sign for rental property owners, it will certainly put millions of renters hit hard by pandemic-related income loss in an even more difficult position, and further government intervention will likely be needed to avoid a painful wave of evictions. In New York City, for instance, 1-bedroom median price dropped 1.9% from the month before $2550, and the 2-bedroom median decreased 3.0% to $2900. The 1-bedroom median and 2-bedroom median were down 15.0% and 17.1% from last year, respectively. Many landlords still find themselves with a great number of vacant units, particularly due to the mass exodus from New York City to Long Island.
Vacancy rates affect the price of housing. In a market in which there are a lot of vacant homes or apartments, prospective tenants or buyers are at an advantage. On the other hand, in a market in which vacant homes or apartments are scarce, the power dynamic is reversed. The landlords (or sellers) are in a position to tend to bid up the rents. Therefore, when there is an unusually low vacancy, the price of housing will tend to be bid up over time. When there is an unusually high vacancy, the price of housing will tend to be bid down over time. Usually larger metro areas have an advantage when it comes to rental properties. They have an abundant supply of renters in the high-income bracket with more disposable income who are willing to compete for the best apartments and rentals
Buyers of apartment properties are returning to the market, spurred by historically low-interest rates and increased equity financing availability. In the third quarter of 2020, the rental vacancy rate was the highest in Metropolitan Statistical Areas (7.5) percent. Also, it was not statistically different principal cities (7.0 percent). But suburbs had the lowest rental vacancy rate of 5.5 percent, 1.5 percentage points lower than principal cities. According to The New York Times, an estimated 5% of New York City residents and 18% of Manhattanites alone left the city between March and May. Suburbs like Westchester, Long Island, and North Fork have become other popular sanctuaries inside New York State.
While the media tends to obsess over At the moment, the foreclosure moratoriums have kept lenders from being able to even start their processing of defaults. One of the negative housing predictions is that the supply in the form of foreclosed homes may overwhelm the demand by many folds in 2021. The result would be that prices are going to plummet again and the real estate sector will likely cool off. The major effect will be seen in the summer of 2021 because foreclosure that starts today is probably not going to be processed until mid of 2021. First of all the mortgage forbearance must end. Then the backlog of prior foreclosure and eviction cases must be cleared before a wave of new ones can be processed.
Overall I always feel it is best to think positively, however if you or someone you care about get’s into trouble please reach out as we can move fast and take advantage of the booming market before any changes take place that could affect your ability to sell. Buyers should consider being well prepared as we never know when an opportunity will hit as the past is not always an indicator of what will happen in the future. Please feel free to reach out to me on social media or look me up at Compass and we can make sure you are prepared to buy or sell depending on what happens next.