Low Hamptons Home Inventory Holding Back Sales And Driving Up Prices

The number of Hamptons single-family home sales dropped by a third from the third quarter of 2020 to the same period in 2021, a statistic that belies the strength of the market.

The real story is that housing inventory is tight and listings are being snatched up quickly at prices that haven’t been seen before: One out of every 10 sales was for more than $5.1 million.

The Elliman Report found that the average sales price rose 14.7 percent, to $2.39 million, and the median sales price rose 15.7 percent, to $1.41 million. Single-family home inventory fell 40.5 percent, from 1,765 to 1,051, and the average number of days on the market slid 36.5 percent, from 156 to 99.

Houses are also selling for closer to their last listing price. In the third quarter of 2020, the average listing discount was 11.7 percent. In the third quarter of 2021, the average fell to 6.7 percent.

There is one main reason why the number of sales is down, according to South Fork real estate professionals.

“Lack of inventory, without a doubt,” said Todd Bourgard, Douglas Elliman’s senior executive regional manager of sales for the Hamptons.

Though the number of sales to date in 2021 is down, the dollar volume is up, he noted. That means that though fewer properties changed hands, more dollars changed hands.

“Almost 30 percent of our sales in the third quarter sold above asking,” Bourgard said. “That’s an incredible amount. And the days on the market fell to its shortest time in 15-plus years. So they’re coming on, the people are buying them and they’re closing up quickly.”

The buyers who are having difficulty finding a home right now are the ones who are searching between $2.5 million and $5 million, according to Bourgard. Houses in that range come on the market priced properly and sell very quickly, he said, and each home receives multiple bids. “That tells you that there are many, many buyers in that price range.”

Regarding whether any sellers are putting impossible asking prices on their homes, Bourgard said agents are not seeing that happen.

“I would say 95 percent of the people who are putting their homes on the market really want to sell, and they are listening to their Realtor,” he said. “And the prices that they’re achieving are incredible prices. So there’s no reason to price yourself out of the market.”

He sees no signs of a slowdown. “The homes are going quicker than ever,” he said. “So this is a clear indicator that the buyers are here and they’re serious.”

The author of the Elliman Report is Jonathan Miller of real estate appraisal and consulting firm Miller Samuel. He’s been watching the Hamptons market for more than 15 years.

“The biggest change in the Hamptons is that inventory has come down so much that it is choking off sales,” Miller said. “Sales aren’t down because demand is easing necessarily. Sales are down because of the drop in listings available for sale.”

More inventory came on the market in October, he reported. “But you’re still miles below where inventory would be for a balanced market, so it’s a nominal change.”

Though higher sales prices encourage homeowners to list their properties, houses are not being listed in great enough numbers to satisfy the demand.

“Inventory is like this living, breathing organism that’s generated by people’s stages of life — downsizing, expanding for a growing family, a big job promotion, more income,” Miller said. “Those things take time.”

Not only did mortgage rates fall by 1.5 percentage points prior to the pandemic, they also fell another percentage point after the pandemic began, he pointed out.

“And, meanwhile, the economy is relatively robust. So you’re throwing this significant demand creator at this organism that generates inventory on a steady basis. And you’re throwing this atypical demand at it, and you get this chronic supply problem.”

The reopening of Manhattan post-lockdown has helped the city’s real estate market on the path to recovery — and not at the expense of the Hamptons market.

“People came out here and they really discovered an incredible quality of life in the Hamptons, and we haven’t seen them usher back,” Bourgard said. “We’ve seen them stay. We’ve seen them make their lives out here.”

Judi Desiderio, the founder and CEO of Town & Country Real Estate, never believed those who predicted Manhattan was doomed.

“Manhattan is coming back, and we always knew the city would come back,” she said. “It’s not as though you’re ever going to shut down Manhattan, no matter what you do — and they’ve tried everything — but it’s never going away. It’s always going to be the financial capital of the world.”

But when Manhattan was shut down, there was an unprecedented rush for Hamptons rentals and purchases.

Desiderio said that while panic buying is over, the Hamptons market is still very healthy. “We still have more demand than we have supply, which means the prices are going to continue to tick up, just not at the rate that did before,” she said.

Buyers remain focused on the Hamptons for a variety of reasons.

“Aside from it being a stunning part of the country, the region offers a varied quality of life that’s easily within reach of the city,” said Ernest Cervi, the regional senior vice president for the East End at The Corcoran Group. “If sales volume from this past quarter proves anything, it’s that a piece of the East End is more desirable than ever, and people are more than willing to pay for their piece of it.”

The Elliman Report defines the “luxury market” as the top 10 percent of sales. A year ago, the entry point to the luxury market was $4.2 million. At the end of the third quarter this year, the entry point rose 21.6 percent, to $5.1 million.

“Sales at $5 million or higher were at the highest market share in history,” Miller said.

With luxury inventory defined as $5.1 million and above, there were 369 luxury residences on the market at the end of September. And the inventory of single-family homes for less than that asking price was just 682.

The average price of a luxury residence was $9.3 million, and the median price was $7.03 million, according to the Elliman Report. The average discount off the last list price was 8.7 percent, compared to a 16.3 percent average a year earlier.

Miller noted that the luxury market has had more price growth than the Hamptons market as a whole. “It’s incentivizing inventory to come in, which is the opposite of inventory piling up because there aren’t sales,” he said.

One month into the fourth quarter, Bourgard said the market is very, very strong, and he expects the first quarter of 2022 to start the same way.

“We are at a place in time now where we have so many buyers out here just waiting for the perfect house to come along,” he said. “So it’s been a very good start to the fourth quarter.”

Philip O’Connell, the executive managing director of Brown Harris Stevens in the Hamptons, foresees upward pressure on prices continuing through spring as multiple homebuyers bid on properties that are priced correctly.

“That being said, anything could happen,” he added, recalling the collapse of Lehman Brothers in 2008.

The market trended downward from 2016 to 2019, and when the pandemic hit things could have gone two ways, O’Connell said. “We got lucky and it pushed up our prices and absorbed a lot of inventory, as it’s continuing to do.”

Going into the fourth quarter, the market has slowed but still exceeds prepandemic levels, according to O’Connell.

“It’s not like it was before the pandemic hit,” he said. “For a house that’s priced right, you’re still getting a substantial number of people coming to an open house. You’re getting offers. You’re getting multiple offers in some cases. If that’s not occurring in this market, your house is probably priced too aggressively.”

Usually, in September and October a fair amount of inventory comes on the market — from owners who didn’t use their house enough this summer or who grew tired of being landlords — but that wasn’t the case this year, he said. He’s seen just a quarter of the new inventory he would expect to see.

“I thought many more people would be taking advantage of this low inventory and very strong market and maximizing the return on their home,” O’Connell said.

He attributes the lack of new inventory to uncertainty and ongoing travel restrictions. “People are unsure of the future,” he said. “Everybody thought that Europe was going to completely open up this summer, and everybody was going to be free to travel — and that didn’t happen. … It’s somewhat of a safety blanket, hanging on to your Hamptons home.”