Median Hamptons Home Price Sets New Record In Third Quarter Of 2020 - 27 East

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Median Hamptons Home Price Sets New Record In Third Quarter Of 2020

Brendan J. OReilly on Oct 28, 2020

The median price of Hamptons homes reached new heights in the third quarter of 2020, topping out at $1.2 million and surpassing the previous record of $1.1 million set during the second-quarter of 2007.

The median price is up 40 percent compared to the same quarter last year. And, according to the Elliman Report, the number of home sales, including both single-family homes and condominiums, was 51 percent higher. At the same time, the inventory of homes on the market fell 28 percent.

The number of closed sales in the third quarter — excluding sales that are yet to be recorded by Suffolk County — was 607, the Elliman Report found. The last time there were more than 600 sales in any quarter was the second quarter of 2017, and the last time there were more than 600 in the third quarter was 2014.

The coronavirus pandemic and the related social distancing measures and economic stimulus efforts have been the driving forces behind a spectacular third quarter that saw multiple offers on many properties, especially in the $1 million to $2 million range.

The Driving Factors 
Behind the Numbers

Jonathan Miller of Manhattan-based real estate appraisal firm Miller Samuel Inc., who prepares the quarterly Elliman Report, said this week that two factors driving third-quarter sales activity are pent-up demand and migration patterns away from Manhattan.

The pent-up demand is the result of New York State’s effective shutdown of the real estate industry on Long Island that lasted from late March to June. Many people who would have bought houses then were delayed, so some sales that would normally be recorded in the second quarter were instead recorded in the third quarter.

The migration factor is that shutdowns in New York City and the new ability to work remotely has created a sense of urgency — people who had rented in the Hamptons seasonally in the past and were familiar with the area are now motivated to buy homes and stay in them year-round, at least for the time being.

“In the beginning of this lockdown, you had two things happen,” Mr. Miller explained. “You had sales activity was thwarted — there was a pent-up demand — combined with this outbound migration pattern from the city, where people were leaving because they were concerned about safety. They didn’t want to be locked in the locked-down city for the summer. And all the records or unusually strong market numbers represent, I think, partly, what the Hamptons is becoming, which is more what I call a co-primary market instead of just sort of an affluent second-home market.”

It’s not that people are putting their Manhattan homes on the market and moving east. Rather, they are keeping their city homes and using their new Hamptons homes more like primary homes than vacation homes.

“The buyers there have not abandoned the city, but they’re looking at the Hamptons a little more competitively, as competitive with the city,” Mr. Miller said. “The reason for this is, after the COVID crisis passes — fingers crossed that there is a vaccine in 2021 — there’s still Zoom. I like to say we’re at ‘peak Zoom.’ And it’s not going to be peak Zoom down the road after there’s a vaccine. There’s going to be some in-between.”

The video conferencing software Zoom became ubiquitous overnight, he pointed out. That has infinitely lengthened the tether between work and home, he said. What he expects to see is that people whose offices are in Manhattan will commute there from a much greater distance but much less frequently. And that benefits the outer reaches of the metro area, such as the East End, the Hudson Valley and upstate Connecticut, and other traditionally second-home markets.

The market is still in a discovery period, he said.

Market watchers will have to wait and see which changes are temporary and which impacts are lasting.

“What does the consumer do after the vaccine?” Mr. Miller asked. “How much of peak Zoom will remain, and what will companies do?”

Second-home markets are peaking, he noted. Sales are still strong, but sales growth is not continuing upward quite as fast.

At this point, the demand that built up in spring has largely been satiated, according to Mr. Miller.

Now in the fourth quarter, buyers whose purchasing was delayed by the shutdown are out of the picture. It’s now new home seekers who are exclusively driving sales.

Signed home sales contracts have been strong for quite a while, and closings of those deals are taking somewhat longer than usual, Mr. Miller said. For those reasons, he said he wouldn’t be surprised if the fourth quarter had a level of activity similar to the third quarter.

Another metric Mr. Miller watches is the months of supply, which was cut in half between the third quarter of 2019 and the third quarter of 2020.

“The months of supply is the number of months it would take to sell all available inventory at the current rate of sales,” he said. “It’s 9.1. A year ago it was 19.2 — it was double. So that means the pace is twice as fast. But the 9.1 … is not a record low.

He said the pace of the market feels fast compared to where it has been, but the quarterly average for the decade is 10.7. “We’ve had it as low as 5.8.”

Quality of Life Prevails

Judi Desiderio, the founder and CEO of Town & Country Real Estate, reports hearing from customers that they now want to live in the Hamptons and visit the city, rather than the other way around, as was the case historically.

Ms. Desiderio said 2018 and 2019 were flat years, and even the beginning of 2020 was flat. In that time, there was a lot of pent-up interest, she said. People had been “kicking the tires,” but not buying.

But then COVID hit, she said. “All of a sudden, people said, What am I waiting for? This is no dress rehearsal.’”

There was a tsunami of rentals at the start, then the sales market turned fast and furious, she said, and it had gotten to the point that agents were getting nervous because there were bidding wars over properties. “Somebody’s going to win, somebody’s going to lose, and it just develops hard feelings.”

Then starting in September, the flow went from fast and furious to a steady stream that continues today, according to Ms. Desiderio.

She does not expect interest in the Hamptons to wane anytime soon, and she explained why: “The state comptroller said that Wall Street profits went up 82 percent to $27.6 billion in the first half of 2020, which was almost equivalent to the entire year of 2019. We all know what happens when Wall Street does well — they buy properties, they buy boats, they buy art. They invest their dollars or they diversify their investment funds, and we usually benefit from that.”

She also noted that 10,000 baby boomers retire every day and said COVID may never go away completely, and there will be quality-of-life decisions made.

In a crisis, people go straight to the basics of every day, she said, and that’s “food, clothing and shelter.”

“I call it the four Fs,” she added. “They want family, friends, fresh air and freedom, and in the country, you get that.”

The trend away from buying houses and cars, in favor of renting and ride shares, has reversed.

“That whole instant gratification and disposable mentality went by the wayside when health conditions came into play,” Ms. Desiderio said.

Sales Strong and Steady

Phillip O’Connell, the managing director of the Hamptons for Brown Harris Stevens, said the market was frenetic for a while before leveling off in August, and is now a strong, solid market.

“If you’re thinking about selling the house in the next one to three years,” he said, “now would be the time to put it on the market, if you’re able to.”

These days, an appropriately priced home will be picked up within three to six weeks of being on the market, he said, while a year ago, it could take four to eight months.

That being said, he noted that houses with much higher price points, above $5 million, do take longer to sell because there are fewer buyers at that level. The most demand right now, he said, is under $2 million.

It tends to be the case, Mr. Connell observed, that people who buy in the Hamptons have rented here before. Newcomers tend to rent.

“The rental market has quieted a little bit, but there’s still rentals happening, and people are looking for longer-term rentals,” he said, adding that some are extending their leases and others are now transitioning to purchases.

He said that not everyone who came east to rent or buy because of the pandemic is going to stay, but those who did are seeing everything the area has to offer, beyond just summers and weekends.

Ernie Cervi, Corcoran’s regional senior vice president for the East End, reports that sales and rental activity both remain high, with multiple bidders on properties.

“We even modified our listing system to accept rentals for October, November, December. That was never a search requirement that we had before, but now it is.”

And those who wish to rent for the traditional season in 2021, from Memorial Day to Labor Day, are securing places earlier than they normally would, because in many cases they could not get what they wanted in 2020.

Buyers Are Still Price Conscious

Though the median sales price is up and houses on the market are moving faster, experts interviewed this week agreed that sellers should not take that as a sign to put an aspirational price on a house that far exceeds the sales price of comparable homes.

“Sellers got excited so they may have raised their price, but those houses didn’t sell,” Mr. Cervi said. “Because people are still buying value, they’re not paying crazy prices. If it’s listed properly, the same old rule applies: It’s going to sell, no matter what the condition is.”

When houses are going fast and buyers really want a home, they are more likely to waive a home inspection or an appraisal than they are to overpay, according to Mr. Cervi. They won’t be as meticulous about things like a dishwasher that doesn’t work, he said.

“Even when there is less inventory, sellers have to come to market at an appropriate price,” Mr. O’Connell said. “You can’t just throw a number out there and expect that, because there is less inventory, that people are going to pay it. People are not going to overpay.”

Ms. Desiderio has seen in the last couple of weeks more and more new inventory coming to market and at higher prices. Though the asking prices are higher, they are still appropriately priced considering the replacement costs, she noted. “In other words, if you had to buy the land, hire the architect, hire the builder, build the product, put the pool in, put the landscape in, do everything, connect it to all your utilities, you’d spend more than what you’re paying for the house.”

Todd Bourgard, the senior executive regional manager of sales for the Hamptons, said another reason buyers are looking for good value is because Hamptons real estate is also a financial investment.

“Our consumers are more educated than they ever have been before,” he said. “They know the comps. They know what has sold in the area. During the history of real estate, of course, you hope that the market goes up and goes up, but they’re not going to grossly overpay ever.”

Willing to Put Work In

Many of the newly built homes that were on the market have been sold, so now buyers are looking at older homes, Mr. Cervi said. “That happens in any market — they go for new first.”

Conditions being as they were during the onset of the pandemic, people wanted to be able to move in and live, so new homes were absorbed fast, he said.

“Turnkey is always preferential, but they are not hesitating to come out here and do work to a house,” Mr. Bourgard said. “And this I know because I have several friends who are contractors out here who are booked solid for the next year. I have friends who own pool companies, who are six months out. So the people are clearly not afraid to do work.”

Offices And Private 
Spaces Coveted

Mr. O’Connell said buyers are searching for home with ample outdoor space as well as more multipurpose rooms for children doing schoolwork and for one or two parents working from home.

It used to be that a four-bedroom with a living room and a kitchen was adequate for a family of four, he said, but now they want two dens and a home gym.

“Everybody wants their own nook and cranny,” Ms. Desiderio said. “... They don’t need the big wide open cavernous space.”

Ms. Desiderio has also found that buyers are now more interested in searching for homes in outlying areas, where they can have bigger backyards than villages offer.

“The outdoor space is key, because really they’re coming out here to enjoy that,” Mr. Bourgard said, noting that is nothing new. Spaces and recreational areas such as outdoor kitchens, pools, basketball courts and volleyball courts have all been top priorities

“What’s going to happen next is the home office is going to become the thing to have, so builders are going are going to start outfitting offices and making them slick,” Mr. Cervi said.

Fourth-Quarter and 2021 Outlook

“All indications are the fourth quarter is going to be even better than the third quarter,” Mr. Bourgard said.

“There’s so much going on, and the fourth-quarter reports are going to be even better than the third-quarter reports,” Ms. Desiderio said.

She noted that the last record years for Hamptons homes sales and were 2007 and 2014, and she predicted that 2021 will become the next high watermark. “At least the first half of next year, if not all of next year, should be a banner year for the East End,” she said.

“I think we’re going to have a strong fourth quarter,” Mr. O’Connell said. “Typically, in an election year, the people are hesitant to purchase … To see the third quarter do what it did in an election year is even more amazing, and to see still the solid level of activity, the continued level of activity, with the election going on, is pretty impressive.”

Ms. Desiderio added, “It is the best sellers’ market I’ve experienced in 36 years, so if you’re ever going to consider selling, now is the time.”

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