In the second quarter of 2019, the number of Hamptons home sales declined compared to the same period a year earlier, according to the Elliman Report. It was the sixth consecutive quarter of year-over-year decline
But brokers say there are signs that 2019 is now experiencing a turnaround, as the pace of showings and offers is picking up as of late.
The number of closed sales of single-family homes and condominiums slipped just 1 percent in the second quarter. It was not much of a decline, but it was enough to keep the streak going.
The median sales price was down 4.2 percent, to $850,000, and the average sales price was down 2.5 percent, to $1,726,987.
One factor that market watchers point to as hampering the Hamptons market is the federal 2017 Tax Cut and Jobs Act, which capped at $10,000 the state and local income tax deduction, known as SALT. Because they can no longer get a federal tax deduction for the state income tax and local property taxes they pay over $10,000, some potential buyers in high-tax states such as New York have found that the SALT cap has made them take a step back.
The most striking figure in the Elliman Report is an 88.3 percent increase in the inventory of single-family homes. The number of homes on the market went from 1,295 to 2,439. The months of supply—or the number of months it would take to sell all inventory based on the pace of sales—doubled, from 7.9 to 15.8.
Condos were another story. Inventory rose from 93 to 118, a 26.9 percent increase, but the number of condo sales more than doubled, going from 11 in the second quarter of 2018 to 36 in the second quarter this year, a 227.3 percent spike. At that pace, the months of supply dipped from 25.4 to 9.8, a 61.4 percent decline.
“For a while there, what we had were prices that were just slightly above market value, and buyers who were really looking to get a good deal,” said Todd Bourgard, Douglas Elliman’s senior executive manager of sales for the Hamptons, in an interview last Thursday, July 25, as the report was released.
Mr. Bourgard said there was a difficult time bridging the gap between buyers and sellers. But this month he has seen a turnaround.
“I’ve got to tell you, over the last three weeks, the buyers have come off the sidelines. The sellers have come down to a reasonable market value place, and the buyers are making offers,” he said.
“And the buyers are out there. I really foresee a very good third quarter coming. All good indicators right now. All my agents, they’re running all the time. They’re all busy.”
The luxury market—which had faltered in the last year or so—has stabilized, according to Mr. Bourgard. He attributed that to educated buyers who are prepared to pay market value. It just takes the sellers agreeing to come down on price.
The SALT cap is another reason buyers were on the sidelines, Mr. Bourgard said, explaining that after any new tax law, everybody waits to see how it shakes out.
“I know this market really well, and it always has these little ups and downs,” Mr. Bourgard said. “But the surge we’re seeing in the buyers who are coming out really give it a positive outlook. I’ve been out visiting my offices over the past few weeks here, and all of my agents are telling me the same thing: They are just busy out there with buyers, and they are making good offers on well-priced homes.”
The Corcoran Group has its own quarterly report, with its own methodology. The Corcoran Report goes by the date transactions are recorded, rather than the date the sales closed. So some sales that occurred in the first quarter but were recorded in the second are counted in the report, and some second-quarter sales will show up in the third-quarter report instead.
Corcoran found 403 sales in the third quarter, counting sales from Remsenburg to Montauk and on Shelter Island. Compared to the same quarter in 2018, sales were down 26 percent, and sales volume was down 33 percent, to $759.85 million. The average price slipped 9 percent, to $1.89 million.
Ernest Cervi, the regional senior vice president of East End operations for Corcoran, said this week that he was not shocked by the decline, as he had seen that activity was very slow. But there has been a lot more activity lately, he said, predicting that seasonal buying activity is arriving later than usual this year.
“I just finished a sales meeting with about 20 agents, and they are much busier now,” he said.
People had been concerned about the federal tax law and what it would mean to them—but then they made their first tax payments under the new law earlier this year, Mr. Cervi said.
“When I look back on other tax changes that have occurred over the years, it’s a psychological step that you have to get over. And we’re clearly a place that people want to be, not that they have to be. So they make that decision. It’s a lifestyle decision.”
Knowing the implications of the tax law is one reason buyers are coming out, he said, while another is that sellers have lowered their asking prices.
“We’ve seen prices being repositioned, and that usually brings people back into the market,” he said.
Mr. Cervi advised sellers against holding out for a high price or asking for more than the market value.
“If you want to sell your house, sell it now, because you don’t know what that’s going to look like in the future,” he said. “You don’t know if you’re going to get more or less money. But if you want to sell it, let’s try and sell it now. Price it right to the market.”
He explained that trying to time the real estate market is just like trying to time the stock market—while waiting for prices to go up before selling, prices could go down instead.
Aspirational pricing does a disservice to sellers, according to Mr. Cervi. “If they ask market value or less, they can ultimately get more money for it, because it will create interest,” he said, adding that the reverse is also true.
Also helping the real estate market is that financial markets are doing well, and mortgage rates are near historic lows, he added. He acknowledged that luxury buyers will often purchase in cash to expedite a sale, but he noted they will then often take out a mortgage on the property after they purchased it—so mortgage rates do ultimately matter to them.
“It’s the perfect storm for people to come out and start buying,” Mr. Cervi said.
Staff Writer on Jul 26, 2019