Valerie Labianca | Rising Mortgage Rates & the 2026 Long Island Real Estate Market

Rising Interest Rates Are Causing Alarm , Here's What Homebuyers, Sellers & Investors Need to Know (2026 Update)

By Valerie LaBianca, Licensed Real Estate Salesperson, Douglas Elliman Real Estate , Huntington, NY

If you've checked mortgage rates lately and felt a jolt of anxiety, you're not imagining things. After years of speculation about when the Federal Reserve would finally start cutting rates, the central bank did the opposite this fall , and the ripple effects are being felt from Wall Street to Main Street to the North Shore of Long Island. Below, I've pulled together the most current data from the Federal Reserve, Freddie Mac, the National Association of REALTORS®, the U.S. Census Bureau, and major financial outlets to explain exactly what's happening, why, and , most importantly , what you can actually do about it whether you're buying, selling, refinancing, or renting out a property.

Where Interest Rates Stand Right Now

On September 16, 2026, the Federal Reserve's Open Market Committee raised its benchmark interest rate by 25 basis points to a target range of 3.75%-4%, marking its first increase since 2023. The vote wasn't close, either , the FOMC approved the move unanimously, a signal that the central bank's leadership is united behind the shift after inflation refused to cooperate. CNBCCNBC

Fed Chair Kevin Warsh didn't sugarcoat it. During his post-meeting press conference, he said inflation has been "too high ... for too long," and that the Committee needed to be confident inflation was moving toward its 2% objective "clearly and at sufficient speed" before easing up , a bar that, in the Fed's own assessment, had not been met. Fed rate decision September 2026: Rates rise to 3.75%-4% +2

And this may not be the last hike of the year. According to the Fed's own September projections, officials' year-end rate expectations range between 4.1% and 4.4%, and markets are currently pricing in one more 25-basis-point hike before year-end, with additional increases possibly extending into 2027. That said, looking further out, the Fed's own longer-run projections still show the federal funds rate gradually declining to roughly 3.25%, so this tightening cycle is expected to be temporary, even if it doesn't feel that way right now. Fed’s Interest Rate Decision: September 16, 2026 - dshort - Advisor Perspectives +2

What's Driving the Hike

The Fed's official statement pointed to a economy that's still running hot: "Economic activity is expanding at a solid pace... domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little." Multiple outlets tied the renewed inflation pressure specifically to stubborn inflation driven in part by higher energy and oil prices, alongside broader geopolitical uncertainty. Fed rate decision September 2026: Rates rise to 3.75%-4% +2

Mortgage Rates: The Number That Actually Hits Your Wallet

The Fed funds rate gets the headlines, but what matters to you as a buyer or seller is the 30-year fixed mortgage rate , and it has been climbing steadily for a month straight.

Source: Freddie Mac Primary Mortgage Market Survey® (PMMS®)

According to Freddie Mac's most recent release, the 30-year fixed-rate mortgage averaged 7.03% as of September 24, 2026 , up from 6.95% the week prior, and up sharply from 6.30% a year earlier. That's a rise of nearly a full percentage point year-over-year. Freddie Mac's Chief Economist Sam Khater offered some reassurance, noting the housing market "remains supported by a solid labor market and an economy that is growing at a healthy rate." gcs-webYahoo Finance

Just to put that in real dollar terms for you: on a $300,000 mortgage, the difference between a 6.5% rate and a 7.5% rate works out to roughly $1,896 versus $2,098 per month , about $200 extra every single month, or nearly $2,400 a year, just from rate movement alone. freddiemac

Looking ahead, forecasters aren't expecting dramatic relief in the immediate term. With no additional FOMC meeting scheduled until late October, there's little on the calendar to push rates sharply in either direction this month. Longer-range forecasts remain more optimistic, however: Fannie Mae and the Mortgage Bankers Association have both projected a quarterly average closer to 6.40% as the year progresses. themortgagereportsthemortgagereports

How Rising Rates Are Reshaping the National Housing Market

Higher borrowing costs are already showing up in the sales data , but maybe not in the way you'd expect.

Existing-home sales slowed, but prices kept climbing. According to the National Association of REALTORS®' August 2026 report, existing-home sales decreased 2.0% month-over-month and 1.2% year-over-year to a seasonally adjusted annual rate of 3.98 million , the first time sales dipped below the 4-million mark since June 2025. Despite that, the median existing-home sales price rose 1.6% year-over-year to $429,100, marking the 38th consecutive month of year-over-year price increases. NAR Existing-Home Sales Report Shows 2.0% Decrease in August +3

NAR Chief Economist Lawrence Yun summed up the dynamic simply: "Mortgage rates and home sales move in opposite directions, so it's not surprising to see a mild dip in home buying activity due to high mortgage rates. Still, home prices are rising, and existing home sales are actually up 1.6% year-to-date through the first eight months of the year." realtywire

Inventory is finally loosening up , a genuine shift for buyers. Total housing inventory reached 1.62 million units in August, the first time supply exceeded 1.6 million since November 2019, pushing the market to a 4.9-month supply (a "balanced" market is typically considered 5–6 months, so we're getting closer). More inventory generally means more room to negotiate, longer time on market, and fewer bidding wars. mortgagenewsdaily

Regionally, the Northeast , where Long Island sits , is bucking the national trend on price. Northeast existing-home sales fell 4.0% to an annual rate of 480,000, down 2.0% from a year earlier , but the median price rose 4.3% year-over-year to $556,900, the strongest price appreciation of any U.S. region. That's a critical local nuance: even with fewer transactions, Northeast home values are still climbing faster than the rest of the country. globenewswire

New construction tells a different story. New-home sales rose 6.4% month-over-month to an annualized 684,000 in August, while the average new-home price fell 8.8% year-over-year to $478,700 as builders leaned on price cuts and incentives (rate buydowns, closing-cost credits) to keep buyers moving. That's a real opportunity for buyers open to new construction. inman

Affordability, believe it or not, has actually improved slightly. NAR's Housing Affordability Index registered 104.7 in August, up from 101.2 a year earlier , a modest but real improvement, likely driven by that rising inventory and slower price growth outside the Northeast. globenewswire

What This Means Here on the North Shore of Long Island

Locally, agents are describing 2026 less as a "reset" and more as an evolution. As Glen Fox of Douglas Elliman in Long Beach put it: "Interest rates will remain a major influence, but buyer psychology has changed: even modest rate movement can impact timing and pricing sensitivity. Any rate relief could unlock meaningful pent-up demand. Inventory is expected to remain constrained, though we anticipate modest increases as more move-up sellers re-enter the market." behindthehedges

Molly Deegan of Branch Real Estate Group added that the market should "feel more measured than 2025, but still fundamentally strong... fewer bidding wars, more thoughtful offer structures, and smoother timelines overall." behindthehedges

In plain terms: Nassau and Suffolk remain seller-favorable markets with tight inventory, but the frantic, no-contingency bidding wars of the past few years are softening into something more negotiable , especially for buyers who come prepared.

What Buyers Should Actually Do Right Now

1. Get pre-approved, not just pre-qualified. In a market where rates can move materially week to week, a real pre-approval locks in your buying power and shows sellers you're serious , which matters even more as competition eases slightly.
2. Ask about a temporary or permanent rate buydown. With new-construction prices softening and builders offering incentives, a 2-1 buydown or seller-paid points can meaningfully lower your effective rate in year one and two.
3. Don't wait for the "perfect" rate. Remember the old real estate adage: marry the house, date the rate. You can always refinance later if rates fall , but you can't go back and buy today's home at today's price if it sells to someone else.
4. Take advantage of rising inventory to negotiate. With supply at its highest level in over a decade nationally, you have more leverage on price, concessions, and inspection contingencies than buyers had in 2021–2023.
5. Consider an adjustable-rate mortgage (ARM) if you won't be in the home long-term. ARMs often carry meaningfully lower introductory rates than 30-year fixed loans right now.

What Sellers Should Actually Do Right Now

1. Price realistically from day one. With inventory rising and buyers more rate-sensitive, overpricing leads to stale listings and price cuts , which spook buyers more than starting accurately.
2. Lean into your local price strength. Remember, the Northeast is one of the only regions still posting strong year-over-year price gains , use that data in your listing narrative.
3. Offer to help buy down the buyer's rate. A seller credit toward points can be more persuasive than a straight price cut and often costs you less.
4. Stage and market aggressively. As bidding wars cool, presentation and professional marketing matter more than they did when homes sold themselves in 48 hours.
5. Talk to your agent about timing a sale vs. a purchase. If you're a move-up buyer, understand how carrying two mortgages (even briefly) plays out at today's rates before you list.

What Landlords & Investors Should Know

Higher rates typically push would-be buyers into the rental market longer, which can support rental demand and rates for landlords , something I discussed in depth on my podcast about whether the North Shore of Long Island is becoming more favorable for landlords. If you own investment property or are considering becoming a landlord, now is a good time to reassess your numbers against current financing costs.

Frequently Asked Questions (FAQ)

Q: Will mortgage rates go down before the end of 2026?
A: Possibly, but not guaranteed. With the next FOMC meeting not until late October, near-term movement is more likely driven by economic data (jobs reports, inflation reports) than by Fed action. Fannie Mae and the MBA project rates averaging closer to 6.40% on a quarterly basis, but the Fed's own dot plot shows some members expecting the funds rate to stay elevated through year-end.

Q: Is now a good time to buy a house with interest rates this high?
A: For many buyers, yes , because rising inventory means more negotiating power, and you can always refinance if rates drop later. Waiting for "perfect" rates often means competing against more buyers when rates do fall, driving prices back up.

Q: How much does a 1% interest rate increase affect my mortgage payment?
A: On a $300,000 loan, moving from 6.5% to 7.5% adds roughly $200/month, or about $2,400/year, to your payment.

Q: Should I get an adjustable-rate mortgage (ARM) instead of a fixed rate?
A: ARMs can make sense if you plan to sell or refinance within 5–7 years and want a lower introductory rate. If you're planning to stay long-term, a fixed rate offers payment certainty.

Q: Are home prices going to drop because of higher rates?
A: Nationally, prices are still rising (38 straight months of year-over-year gains per NAR), though at a slower pace, and the Northeast specifically is seeing some of the strongest appreciation in the country. A widespread price crash is not what current data shows , a gradual cooling and rebalancing is more accurate.

Q: What's happening with home inventory right now?
A: Inventory is the highest it's been in over a decade nationally (1.62 million units, a 4.9-month supply), which is good news for buyers who've felt shut out of the market in recent years.

Q: Is Long Island still a seller's market?
A: Yes, generally , Nassau and western Suffolk remain tight, seller-favorable markets, though the extreme bidding-war conditions of recent years are moderating into something more balanced and negotiable.

The Bottom Line

Rising interest rates are real, they're causing real alarm, and they're changing real numbers on real mortgage applications. But "alarm" doesn't mean "avoid." Markets are adjusting , inventory is loosening, sellers are more flexible, builders are offering incentives, and buyers have tools (buydowns, ARMs, negotiation leverage) they didn't have two years ago. The key is working with someone who tracks this data weekly, not just when it makes headlines.

Whether you're buying, selling, refinancing, or thinking about becoming a landlord on the North Shore of Long Island, I'm here to walk you through exactly what these numbers mean for your specific situation.

VALERIE LABIANCA
Licensed Real Estate Salesperson
Douglas Elliman Real Estate

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Sources: Federal Reserve (federalreserve.gov), Freddie Mac Primary Mortgage Market Survey®, National Association of REALTORS® (nar.realtor), U.S. Census Bureau/HUD New Residential Sales, CNBC, Advisor Perspectives, iShares/BlackRock, HousingWire, The Mortgage Reports, MortgagePoint, Inman, Behind the Hedges (Douglas Elliman).