Soaring prices in New York City are pushing more and more buyers to Long Island, where they get into bidding wars over a short supply of homes. The L train shutdown scheduled for 2019 also has developers, agents, and residents already planning for it: 54% of respondents to a Property Shark survey said renters will look elsewhere and Long Island City was among the top alternatives. But what does the Long Island real estate forecast for 2018 have in store for homeowners?
The impact of the tax bill on the Long Island real estate forecast for 2018
The federal tax overhaul has reduced tax incentives for homeownership, depressing Long Island home prices with high property taxes and stimulating demand for already scarce lower-cost homes and rentals. The legislation has capped deductions for state and local taxes at $10,000, to the dismay of many. The burden of property and other local taxes happens to weigh more heavily on Long Island than it does nationally. In 2015, Nassau County taxpayers claimed an average $23,856 in deductions for state and local property, income, sales and other taxes—nearly double the national average of $12,471, while Suffolk County residents claimed an average of $18,413. The reality is that 46.5% of property taxpayers in Long Island currently pay more than $10,000 annually in property tax. More than half of Nassau homeowners and nearly 33% of Suffolk homeowners owe at least $10,000 in property taxes, far exceeding the national rate of 4.4%. The $10,000 cap will affect more than 300,000 Long Island homeowners.
First-time buyers are also adversely affected. “Affordability is paramount for young buyers,” said Paul Llobell of Great River, the Long Island Board of Realtors legislation committee chairman. He adds that they may decide not to buy if they can’t justify higher home prices and taxes on Long Island, combined with fewer deductions on their federal income tax, and may instead decide to leave Long Island. In 2018, “While there may be a few winners, the majority of Long Islanders will pay more federal taxes as they will no longer be able to deduct all their state and local taxes,” said Kevin Law, CEO of the pro-business Long Island Association. Retirees and the elderly are also being affected: with a drop in real estate values, many will need to adjust their retirement plans if their real estate properties turn out to not be worth as much as they thought it was. One way or another, it’s certain that the tax reforms will be having an impact on the Long Island real estate forecast for 2018.
Real estate forecast for 2018: Long Island Counties
Long Island’s real estate market is booming, particularly for sellers, of course. The median home value in Nassau County is $512,900, and home values have gone up 5.6% over the past year. Zillow is predicting they will rise 1.9% further within the next year. The median rent price in Nassau County is $3100, which is higher than the New York Metro median of $3000.
The Long Island Board of Realtors counted Queens home sales at a rate of approximately 692 homes during November—a reduction of 13.3% from October and of 4% from November of last year. A December 2017 Queens real estate market report shows that residential home sales were up 10.8%, while Queens condo sales were down 29.1%, and over the last 12 months, home sales were down 2%. The average price of a residential 1-3 family home in the county is $792,172, and the average price of a condo is $531,545. As of December 2017, Queens residential home prices were up 5.5%, and condo prices were up 3%.
In Suffolk County, home prices were still lagging behind their pre-recession highs—at least as of the summer of 2017. The median price for a closed home sale in Suffolk was $365,000 in June—representing a 7.4% annual gain, but still placing the Long Island County region well below the 2007 high point of $420,000, according to listing service figures.
Brooklyn, however, may be one of the biggest contenders in terms of dollar contributions when it comes to the Long Island real estate forecast for 2018. In the last few years, Brooklyn has and continues to reach new highs. As of the second quarter of 2017, the median home price hit $775,000—a major escalation of 17%. Fuelled by high-stakes bidding wars among buyers as demand starts to outweigh the currently available inventory supply, the real estate market forecast for Long Island in 2018 might yet shape up in any number of ways.