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Dottie Herman, the vice chair and former CEO of Douglas Elliman.
Dottie Herman, the former CEO and current vice chair of Douglas Elliman, has been a homeowner in the Hamptons for decades and a close watcher of the East End real estate market.
She purchased Prudential Long Island Realty in 1989 and, in 2003, with business partner Howard Lorber, purchased Douglas Elliman. Forbes says she became “the richest self-made woman in American real estate by selling homes to New York’s elite.”
In an interview this month, she offered her predictions for 2024 and was frank in her assessment of the real estate market both here and nationally: Herman said 2023 was not a good year for the Hamptons — or anywhere.
“I can’t just single out the Hamptons, because there were not a lot of transactions,” she said. “I think what happened was, interest rates really rose. They were, at some point, 8 percent. They’ve gone down since then, but they rose and there was a lot of uncertainty, and people were priced out of the market.”
People were indecisive, unsure of whether there would be a recession, and sat on the sidelines, she said.
“But the biggest problem, which really has been in every market, not just the Hamptons, is inventory. There’s not a lot of inventory around. I would say it’s a combination of inventory and interest rates — but I would put inventory before interest rates.”
During the onset of the COVID pandemic, half of New York City cleared out and headed to the Hamptons, buying or renting whatever they could, Herman recalled. Once the pandemic calmed down, people went back to the city, she said. And then 2023 brought uncertainty.
She also noted that many buyers obtained interest rates of around 2.5 or 3 percent during the early stage of the pandemic. For people like her, who bought a house back when interest rates were 16 percent, today’s interest rates don’t seem high, but for younger people, she said, it was a turnoff when interest rates rose to 5.5 percent, then 6 percent, then more than 7 percent.
Those rates actually are not high when considering that, historically, mortgage rates have averaged 7.5 percent, she explained.
Herman expects more activity in 2024 and said there have already been some big sales in the first quarter. However, she added that there still will be a shortage of inventory, so “the floodgates are not going to open up.”
Second-home markets in general will continue to benefit from the work-from-home trend, she predicts, noting that having more free time and the ability to work remotely makes a second home more attractive. “That really helps out the Hamptons, and I think it’s going to really benefit the North Fork, too,” she said.
She thinks most office workers will never go back to five days a week — perhaps three days in the office, but Fridays and Mondays will still be off, providing the opportunity to spend a long weekend in the Hamptons.
Another trend she anticipates rising is fractional ownership of luxury homes.
Rather than time-shares, fractional ownership involves actual ownership of a property — a single-family home. A buyer could purchase a half, a third, a quarter, or as little as an eighth of a home and share use of the property with the co-owners.
Herman is on the advisory board of Pacaso, a company founded in California that facilitates fractional ownership and is working to make inroads in the Hamptons.
Regarding home prices in 2024, Herman foresees them staying flat. Owners will have a little more flexibility, she said, adding, “I don’t see any fire sales, though.”
“You shouldn’t be afraid to make an offer,” she advised. “Whereas a year or so ago, if it wasn’t all cash, you didn’t have a shot.”
With the Federal Reserve projected to cut the federal funds rate by 75 basis points over the course of 2024, Herman expects more home sales activity. She think the “magic number” for mortgage rates is 5 or 5.5 percent.
Though she believes there will be more activity, she doesn’t believe there will be a booming market in 2024.
“We have a lot of uncertainties that are going on,” she said. “People are unsure what’s going to happen. The stock market was decent, but there’s a lot of wars going on now. People don’t know what’s going to happen with the Middle East.
“When there’s too many question marks, a lot of people then kind of say, ‘Well, let me just take a breath and see what goes on.’”
For year-round residents who wish to buy a home, Herman said flatly, “You’re not going to find anything in the Hamptons.” Though she added that there could be an occasional opportunity in a “handyman special” or in finding a builder who will finance a purchase for less than a bank. It also helps the buyer to accommodate the timing that a seller is looking for, she added.
“When you buy in the Hamptons, you’re buying Park Place or Boardwalk. It’s a long-term investment,” Herman said. “I believe the Hamptons will always pan out. I don’t think that you’re really going to lose money unless you buy a house at the top of the market and you’re forced to sell it right after that as the market drops.
“But I think that, overall, the Hamptons is a pretty strong market.”
