Jonathan Miller on What To Expect From the Hamptons Real Estate Market in 2023

Market watcher Jonathan Miller, the president and CEO of real estate and appraisal firm Miller Samuel Inc., recently joined “27Speaks,” the weekly podcast by The Express News Group, to discuss the state of the Hamptons real estate market and what to make of the big drop in the number of home sales in 2022.

The number of South Fork home sales plummeted by around 50 percent in the fourth quarter of 2022, when compared to the same quarter a year earlier. But that data point hardly tells the whole story of what’s happening in Hamptons real estate.

Chronically low real estate inventory in the region is restricting the number of home sales while also bolstering prices. And sales were bound to look slow when compared to the peaks reached during the height of a pandemic-driven buying frenzy.

Miller lent his expertise to help interpret the data and offered his outlook for the months to come.

He explained that, due to low inventory of homes for sale across the United States, a price correction is not expected this year — despite doubled interest rates over the last year. But he does expect that the market is on its way to a return to normal.

“I always hate people who say, ‘This time it’s different’ — but this time it’s different,” he said. He explained how, unlike the housing crisis of 2008, unsold inventory is not piling up.

“The Hamptons is not unique in this aspect,” he said. “The 40-plus housing markets I cover across the U.S., they’re all seeing the same thing. They’re seeing a chronic lack of supply, and it goes with this idea that people are highly wedded or connected to the low mortgage rate they may have enjoyed from a purchase or a [refinance] in the last three or four years. That bond will ease over time, but it is the reason why we’re not seeing prices correct.”

In some parts of the country — including the suburbs of New York City, but not so much the Hamptons — 25 percent of transactions still include bidding wars, Miller said. “So it’s no surprise that we have record prices or high prices. ... Yes, doubling [interest] rates is slowing down volume, but inventory is remaining so low that prices don’t have the ability to correct or to fall significantly. Which makes this different.”

This past fall, supply chain issues were a limiting factor on inventory, Miller said, adding that many of those issues have dramatically improved. He noted that lumber is rebounding in price again, but that inflation itself has largely been beaten back by the Federal Reserve’s rate policy pivot a year ago.

“We’re looking at maybe by the end of the first quarter or sometime in the spring that inflation is largely a nonissue,” he said.

He said he is no longer blaming the supply chain for high prices, because both new construction and existing homes have elevated prices.

Miller said he calls 2023 “The Year of Disappointment.”

“Sellers are not going to get the price they wanted in 2021, and buyers aren’t going to get meaningful discounts,” he said. “So everybody’s not happy. In some ways, I find that like confirmation that we’re normalizing, because both parties are not happy about the state of the market.”

To describe a market condition that the Hamptons was experiencing before the onset of the COVID pandemic, Miller coined the term “aspirational pricing.”

“Aspirational pricing was out of control in the Hamptons, where it was not uncommon to see someone buy something for $10 million, put a couple of million into it, and put it on for [$28 million]. That was very common,” he said. “And then what happened was that their peers were all doing the same.”

He said aspirational pricing still exists but is a far smaller force in the market psychology, post-lockdown.

To get context on what’s normal or reasonable in the market, Miller advises paying more attention to the state of the market before the roller-coaster of the pandemic. “But I think that sort of skew is going to go away,” he added. “In the next quarter or two, we’re not going to care about prepandemic anymore.”

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