Listen to this articleThe Federal Reserve’s decision to cut interest rates, with the prospect of more to come, was widely hailed as a boon for the local housing market because it will lower mortgage rates, and in turn, make it easier to afford a house. Without question, lower interest rates will reduce mortgage payments. However, that alone will not address the significant obstacles many young families face when buying a house or upgrading to a larger space as they have children.
The high rates we have had for years have slowed demand for sure, discouraging first-time buyers from entering the market and keeping current owners with low rates locked into homes they might have already outgrown. That has created a tight market by reducing inventory and the number of buyers. At the same time, the low inventory has kept housing process increasing here on Long Island. From that perspective, lower rates should entice more sellers off the sidelines and make it easier for new buyers to afford a home. But it won’t happen overnight, and the short-term prognosis is not as rosy as some would like new home buyers
to believe.
As buyers re-enter the market, that will only increase competition for homes. Yes, more inventory should come onto the market as people look to upgrade to larger homes, but that is not likely to be enough to handle the increased demand from buyers. We all know people who have had to bid above the asking price to get a house, and we can expect that to continue into the near future.
To make matters worse, the high rates discouraged new home construction over the last few years, and many developers had to put projects on pause. As a result, the pipeline to bring new inventory into the market is hardly robust. The lower rates will facilitate many of those same developers to restart their projects, but it will be awhile before those new homes hit the market.
The reality is buying a house on Long Island is not going to get magically easier overnight because of the Fed’s decision, even as we welcome it. Rather than wishful thinking, we need real action from government leaders and community leaders alike. We need to face the hard truth that building new homes–both single family and multifamily homes –is harder than it should be in communities across the Island.
We all know the arguments: more homes mean more kids enrolled in schools, more traffic on our streets and more stress on government services, so let’s not do anything. It’s “NIMBYism” at its worst, and unfortunately a handful of loud voices scares our elected officials into inaction and delays–which kills projects. As a result, taxes keep increasing, the cost of living keep going up, and we are driving more young people off the Island to places like North Carolina and Florida.
This is not a call for giving developers carte blanche when it comes to new projects. It’s a call for a sensible, balanced approach that recognizes we need more housing on Long Island if we have any hope to keep it affordable so our kids can stay here and raise their families. It’s a call for community leaders and elected officials alike to stand up to the vocal minority that wants to close the door on all new projects to protect their own interests at the expense of the rest of us. It’s a call on state leaders to support new housing programs–not mandates–here on Long Island but also in places like New York City, where the housing crisis keeps pushing people into the suburbs, driving up prices to levels local families cannot afford.
The Fed’s decision to cut rates should be viewed as an opportunity to renew our commitment to keep young families and senior citizens here on Long Island by spurring the sensible development of new housing. It is one important step that must be met with real action at the state and local levels. We must seize this opportunity or watch as more of our friends and families get priced out of the market and leave Long Island for other states to pursue their dreams of owning a home.
Mike Florio is CEO of the Long Island Builders Institute (LIBI), an Islandia-based association representing commercial and residential builders, remodelers, multi-family developers, rental buildings, general contractors and professionals.
