30 Buyer Groups Compete for Single Co-Op Apartment as Long Island Inventory Crisis Enters Seventh Year

Long Island’s residential real estate market is defying national trends tied to mortgage rates, with intense buyer demand persisting despite higher borrowing costs. Susan MacDonald, a real estate salesperson at Daniel Gale Sotheby’s International Realty, says the region’s inventory shortage has now lasted for six years, creating competition that overwhelms available supply regardless of financing conditions.

“The mortgage rates are not affecting the buyer pool in our area,” MacDonald says. At a recent co-op apartment listing, she counted 30 separate buyer groups at the first open house. Only one could purchase the property, leaving the rest to compete for the next available listing.

This pattern highlights a market in which supply constraints, not mortgage rates, determine what happens. Even if rates were to fall, the shortage of homes would still fuel competition. The assumption that lower rates alone would unlock more sales does not hold in Long Island, where a structural inventory shortage is the dominant force.

Renovation Replaces Relocation

The core of the inventory problem lies in changing homeowner behavior — a trend that began before the pandemic and has only grown stronger. Homeowners with mortgage rates between 2.5% and 3.0% are choosing to stay put and expand their current homes rather than sell and move up. This decision eliminates the typical turnover that replenishes starter home inventory for first-time buyers.

“Normally, first-time buyers would have a few children and need more room, so they’d sell their starter home and move up,” MacDonald explains. “Now, because they have those very desirable mortgage rates, they’re adding to their starter homes instead of buying their next home.”

This creates a bottleneck that won’t ease even if interest rates fall to 4% or 4.5%. Homeowners with 2.5% mortgages would still face a significant increase in costs if they sold and bought a new property. Expanding their existing home allows them to keep their low rate and avoid the financial hit, further reducing the number of homes available for resale.

MacDonald observes widespread construction across Long Island, with homeowners building additions rather than relocating. This shift has redirected capital from sales to renovations, fundamentally changing how the housing market responds to growing families and demographic shifts.

Parental Cash Assistance

The shortage of homes has changed who can buy. Younger buyers are increasingly turning to family wealth to compete in bidding wars that favor cash offers. MacDonald notes that many successful buyers present as cash purchasers, often with significant help from parents.

“A lot of young couples are presenting themselves as cash buyers, and it’s often their parents providing the funds,” she says. This trend means access to family wealth, rather than individual income or credit, is now a key factor in winning bids. Some buyers may arrange private repayment with their families, but the ability to present a cash offer removes financing contingencies and appraisal risks, making these offers more appealing to sellers.

As cash offers become the norm, buyers without parental support face a tougher path. This dynamic is reinforcing disparities in homeownership, with wealthier families better positioned to help younger generations secure homes in a highly competitive market.

Market Data Keeps Pricing in Check

Despite fierce competition, buyers are not overpaying. Ready access to recent sales data keeps pricing realistic. MacDonald says that sellers who overprice their homes — sometimes by as much as $100,000 — still receive offers that align with true market value rather than inflated expectations.

“Because buyers have access to market data, you’re going to get offers that reflect the real range,” she explains.

This transparency limits sellers’ ability to set unrealistic prices, even when inventory is low. Overpriced properties either adjust or leave the market, but well-priced homes continue to sell quickly.

Preparing Clients for a Fast, Complex Process

MacDonald encourages both buyers and sellers to start preparing earlier than they might expect. Homes move quickly once listed, but the process from contract to closing still takes six to eight weeks due to attorney reviews and financing steps. For sellers, this means handling repairs and setting a realistic price before listing. For buyers, it means planning for possible lease extensions or temporary housing while waiting for a deal to close.

Her firm, Daniel Gale Sotheby’s International Realty, markets all homes with the same attention to detail and presentation typically reserved for luxury properties, aiming to maximize exposure and attract strong offers across all price points.

No End in Sight for Shortage

MacDonald expects these market conditions to last at least through 2026. She sees no sign of significant inventory growth ahead. The supply shortage is driven by logical homeowner decisions, not by temporary disruptions. As long as homeowners face a financial penalty for moving — trading a 2.5% mortgage for a higher rate — most will choose to renovate rather than relocate.

As a result, Long Island buyers should expect continued competition and limited options, regardless of where interest rates go. Sellers will benefit from strong demand if they price appropriately, but must also prepare for a complex, drawn-out closing process. The region’s housing market will remain defined by scarcity and competition for the foreseeable future, with access to capital and family support playing a decisive role in who gets to buy.