The East East Real Estate Roundtable
Was it the trade war, the global economic uncertainty, the impacts of 2017’s federal tax law, sellers with unrealistic expectations, or something else that led to Hamptons home sales lagging in 2019?
Last year saw three quarters of contraction in the number of sales as inventory grew. But 2019 ended on a high note, with fourth-quarter sales outperforming the year before, and inventory that had been piling up starting to move. Prices came down — as industry insiders had been saying had to happen — and houses that had been sitting on the market began to sell — also as insiders said would happen.
Whether the slight turnaround in the fourth quarter of 2019 was a blip or will be sustained remains to be seen, but real estate professionals across the South Fork report that 2020 is showing great promise in the early weeks.
For insights on the year that was and what the future holds, we’ve assembled a panel of experts to discuss the factors impacting the Hamptons real estate market and the trends they see now.
In terms of the Hamptons real estate market, what will 2019 be remembered for?
Todd Bourgard: A slow start with a strong finish.
Jack Pearson: The most amazing summer weather of the decade.
Simon Harrison: The seasonal swings of sales this 2019 were opposite the norm, which is usually busy in mid-spring and mid-fall. What’re normally “the dog days” of summer were busy — and December was hot.
Judi Desiderio: 2019 will be remembered as the bottom of this market cycle. The other memorable uniqueness of 2019 is that it was THE year when the stock market flew and luxury real estate didn’t follow along.
Christopher Covert: The general lack of any urgency by buyers and the expected discounts on asking prices set the tone for most of the year.
Christina Matos: A convoluted year, with a strange market climate and investors’ behavior.
Ernie Cervi: In our Hamptons real estate market, 2019 will undoubtedly be remembered for good inventory, a steady stream of price reductions, strong financial markets and very low interest rates. All of these things together created the perfect storm for a relatively strong market.
Beth Felsen: It was hard to make sense of 2019, as there was a significant volume decrease overall, but the higher-end luxury market in the fourth quarter showed significant growth. Certain areas of the Hamptons, like Sag Harbor Village and Amagansett, are in such high demand. Buyers want turnkey product. If a property is in the right location and is realistically priced, it moves quickly.
Beau Hulse: Opportunities to sell and purchase. The Hamptons market saw a slow start to the year, and even though sales volumes were down and the average sales price dropped in some categories in 2019, the last quarter started to see an upward trend in the overall market’s performance. The gradual decline in listing prices in the first half of the year created increased opportunities to sell and purchase, which by the latter half of the year attracted more foreign buyers, millennials, entrepreneurs and parties that had been waiting for these adjustments. This interest was keenly reflected in the $20 million-plus market, which reported a significant increase in sales.
What forces hampered sales in 2019?
Todd Bourgard: The SALT tax was a challenging issue to navigate. The public seemed to take a wait-and-see approach for the first two quarters of the year.
Jack Pearson: The general confusion of political craziness is distracting, particularly the trade wars and ups and downs of the stock market. The buyers are still rattled by the tax changes and are considering other geographic options. The prices of many listings are still too high.
Simon Harrison: There were real concerns about inventories getting bloated, but that wasn’t across the price spectrum, and now we are seeing pent-up demand create effective vertical absorption.
Judi Desiderio: A convergence of forces — the media pounded Hamptons real estate, the stock market was the place to have capital, with the Dow up 29 percent for 2019, and the tax issues from SALT to wealth taxes.
Christopher Covert: Clearly, there was a disconnect between the Hamptons real estate market and the general strength of the economy overall. With the city real estate market taking a beating due to a glut in new development, I think the overall malaise trickled down to our market. Certainly, the press coverage was fairly negative as well.
Christina Matos: In the fourth quarter, we started to see signs toward transitioning to a stronger market. I think, after a lull made possible by the lack of urgency on the consumer’s side, the need for a price adjustment of the market became clear to even the most hesitant/stubborn sellers. This marks a great time to be on the buying side, and serious investors should be cautious of “missing the boat” if they wait too long in anticipation of a further decline in prices. This is a cyclical market, and inevitably the curve will start to inch its way back up — as we are starting to notice.
Ernie Cervi: General concern regarding uncertainty at both home and abroad may have hampered sales activity. However, we also saw record-setting stock market highs and extremely low interest rates, which resulted in increased activity in Q4 of 2019, compared to the same time a year ago.
Beth Felsen: The majority of sellers still had a 2016 mindset and felt that their homes are worth more than current market value. Buyers will wait until the price comes down. There is a great deal of inventory of homes that are dated and need a significant amount of work or are in less desirable locations.
Beau Hulse: High levels of inventory and, in some cases, sellers not willing to adjust prices to the changing market.
What were the bright spots of 2019?
Todd Bourgard: The ultra-luxury sector was thriving this past year. And we also experienced a big demand for the under-$2 million market.
Jack Pearson: The sellers are now modifying pricing, and that is encouraging buyers to seriously look and buy. It was an amazing summer in 2019 and bodes well for rentals and sales this spring and summer. Good weather is always an encouraging factor.
Simon Harrison: The middle of the summer isn’t brisk, but our office sold a village house that closed in eight days. That was fast — but in those eight days, we sold and closed a waterfront house in 48 hours.
Judi Desiderio: The über-expensive, over $20 million came back, and December and January are the busiest winter months we’ve had for sales activity in over a decade.
Christopher Covert: The last eight to 10 weeks of the year were by far the biggest surprise of 2019. After eight quarters of sluggishness, something clicked right about the time I put 139 Seascape Lane into contract, and the market saw a big uptick in activity at all price points.
Christina Matos: The very low and the high ends of the market continued to see activity despite a slowdown in the middle price ranges.
Ernie Cervi: Our brightest spot of 2019 is that Corcoran participated in 44 percent of all transactions over $10 million on the East End. Our nearest competitor participated in 20 percent of those transactions, so we handled more than double the amount of our closest competitor — of which we’re very proud.
Beth Felsen: It’s a buyers’ market, and buyers were able to scoop up great properties for a great value.
Beau Hulse: The last quarter, when sellers adjusted prices and buyers took the opportunity to purchase.
What is the general mood of the market now?
Todd Bourgard: The general mood is positive, with strong vivacity. Sellers, buyers and agents alike are still abuzz from the outstanding fourth quarter that Elliman experienced. That synergy has continued into the first quarter of 2020.
Jack Pearson: Getting more positive with modified pricing. It is still too soon to predict what this year will bring. I think that the first half will be stronger than the second half due to election distraction come fall.
Simon Harrison: We are optimistic that the spring of 2020 will be a great year. Equities markets and the interest rate environment are helping both sides to show willingness to meet at market where transactions click.
Judi Desiderio: A million times better — buyers acknowledge the bottom was hit and the money that sat on the sidelines for the past 18 months is roaring back.
Christopher Covert: There seems to be a cautious optimism that the late bump in 2019 is carrying into the new year and that 2020 could be a good year. Brokers seem busy, and I am far busier in January then in past years, having done a good number of new deals in just the first couple of weeks of the year.
Christina Matos: Optimistic. The traffic of buyers has increased, and the rental market is active.
Ernie Cervi: Overall, agents are very positive about the market for 2020. They’re already off to a busy start with both sales and rentals, and looking eagerly and optimistically at how they can strengthen their business based on everything they experienced last year.
Beth Felsen: It’s still a buyers’ market, and we’re seeing significant activity in certain locations where properties are realistically priced to sell.
Beau Hulse: Positive and exciting for sellers, buyers and agents. We are experiencing a great increase in activity.
Have you witnessed any impact from New York State’s new housing rental reform, the Housing Stability and Tenant Protection Act of 2019, or expect any impact in 2020?
Todd Bourgard: I have not seen any negative impact. In fact, our seasonal rental market started strong and early. The number of leases signed in November and December for 2020 rentals was higher than usual. This trend is continuing into the first three weeks of 2020 thus far.
Jack Pearson: Not yet.
Simon Harrison: Several key aspects of the new laws have harsh application to our short-term seasonal markets, and the New York State Legislature is looking at targeted amendments, but it might be June before it could be amended. Changes are bumpy, but markets adapt.
Judi Desiderio: This new law is a disaster! Obviously, not written with short-term rentals in mind. Landlords are angry — rightfully so!
Christopher Covert: Confusion and frustration from landlords, tenants and brokers alike. This new law is completely out of touch with a seasonal rental market like ours, and, hopefully, Albany is able to make corrections. Quickly.
Christina Matos: Yes. With the Hamptons being a unique resort-style rental market, it is caught in a gray area in terms of its standing with the new rental reform. Until the law becomes clear in the inclusion or exemption of such markets from the reform, we are advising all landlords to ensure that their leases comply with the new terms — which is creating significant amounts of confusion, concern and frustration. We are always available to go over what the reform means and how to apply it, but there will certainly be a learning curve for the homeowners.
Ernie Cervi: The objectives of the act were clearly not intended for seasonal or short-term rentals. There are ongoing efforts in Albany to revise the HSTPA of 2019 to exclude rentals of 120 days or less.
Beth Felsen: The rental reform was shocking to many landlords. This will impact the rental market, as landlords will likely want to rent for shorter terms rather than seasonal rentals in the past. We’re seeing that there are not as many full-season rentals in 2020 as there have been in years past.
Beau Hulse: Yes, we have. There has definitely been an impact, and not in a positive way, due to a lack of clarity and questioning how it applies to the Hamptons seasonal rental market, which is continuing into 2020.
Presidential election years, and the uncertainty they bring, are said to cause buyers to pause. Do you find that to be the case?
Todd Bourgard: I have yet, after 23 years in this business, seen an election year cause buyers to pause. In the Hamptons, buyers want to be settled in for the season, regardless of whoever is sitting in that seat.
Jack Pearson: Yes.
Simon Harrison: Real estate markets are always in motion, and at varying speeds, usually connected to a family’s timing and not elections. Economies also track separately than elected officials’ terms. I’ve heard that for my 32 years in real estate, and the “election year uncertainty” notion ends up as predictive sometimes. In the Hamptons, it’s more dynamic, with several markets in motion, year-round, seasonal, luxury, with many participants from different countries, economies and currencies, from $750,000 to $35 million. So, the answer I’ll go with is: No.
Judi Desiderio: In the past, yes — but this year the first half will be fed by pent-up demand, as discussed above.
Christopher Covert: 2016 certainly showed that, but I wouldn’t be surprised if we see the opposite — that is, increased activity — this year to take advantage of strong buyer-friendly policies and market conditions. Currently, we have historically low interest rates, a stock market at all-time highs, and sellers seem to have been conditioned toward realistic pricing. Depending on the outcome of the November elections, some of the advantages buyers have now could evaporate fairly quickly.
Christina Matos: Absolutely! Uncertainty about external factors always has a very real effect on the market. Buyers seem to prefer playing the waiting game instead of making such a big purchase/commitment without knowing what direction the leadership of the country will be heading in.
Ernie Cervi: We have not experienced any pause from buyers to date with 2020 being a presidential election year. Even if buyers do step back temporarily, we do see that they tend to move ahead post-election regardless of outcomes. In fact, 29 percent of our agents said in a company survey that the election has no effect on their clients’ decision to buy a home. Ultimately, there’s really no permanence to any hesitation.
Beth Felsen: Historically, yes, but so far the start of this year is off to a great start.
Beau Hulse: Not in the present quarter. We’ll know better going into the second and third quarters.
Have agents’ concerns with Out East and Out East Agent Tools been addressed? What remains unresolved?
Jack Pearson: Out East never serviced agents in any functional way, so having other programs is great, and saying good riddance to OE is the wave of the future.
Simon Harrison: Out East is just one public website and one of several back-end data stream systems. Our company on The Long Wharf has a robust stack of software. We are out there with more than a hundred public portals, and we have Out East Agent Tools and other reciprocal, reactive systems. The unresolved issues remain with Out East (and other sites), but our firm has clipped and patched to minimize the shortfalls so we can stay on point.
Judi Desiderio: This is still shaking out — agents should only be concerned about listing and selling and marketing properties, not spending exorbitant time researching several databases and sites for information. Additionally, the consumer is giving inaccurate, incomplete and incomprehensible information.
Christopher Covert: What is Out East?
Christina Matos: Many concerns have been addressed, although a plethora remain unresolved. The transition has been hard on agents, many of whom have seen their work affected by it. I would say the issues that remain unresolved are technical in nature, and, hopefully, they will be addressed in the foreseeable future.
Ernie Cervi: Corcoran does not subscribe to Out East Agent Tools.
Beth Felsen: With the majority of the firms moving away from Out East and moving onto another platform, there is a lot of confusion as to what information is accurate in the systems, which makes it extremely challenging to find up-to-date sale and rental properties for customers. When customers are searching on their own, they are finding inaccurate information, and it’s frustrating for everyone involved.
Beau Hulse: Many issues have been addressed but unfortunately not resolved. One of the concerns is listings are fed to Zillow showing up with incorrect prices and information.
What are the hottest, most cutting-edge amenities that buyers are seeking?
Todd Bourgard: Whole-house technology is at the top of the list. Owners want to be able to control every aspect of the home’s workings from their phones, whether they’re sitting poolside in the backyard, or from their living room in Manhattan. They want to control the lights, music, temperature, blinds, gates and security with the touch of a button from anywhere.
Jack Pearson: Anything that makes buying and living easier and more efficient.
Judi Desiderio: Outdoor living spaces that mirror indoor living spaces, which in turn expand the usable areas.
Christopher Covert: Steam ovens are quickly replacing microwaves for buyers looking for clean culinary experiences. And commercial-grade steam cleaners built into laundry rooms.
Christina Matos: If we are looking at someone with high purchasing power in today’s market, there is little to no room for compromise. Aside from checking off the more obvious boxes, like location, view, quality of build and building materials, etc., buyers expect a home that is equipped with all the bells and whistles. Smart technology and connectivity is a must; no one wants to be breaking walls in their brand new house in order to bring it into the 21st century. The general increase in a focus on wellness and health has also transitioned into the real estate market with cutting-edge gyms being a staple in an expensive home, along with an increase in meditation, spa and yoga rooms. Residences on the East End serve primarily as second homes, where people come to relax and entertain/be entertained. Therefore, a fully equipped movie theater is also important. These features, although scaled, are true across various price points.
Ernie Cervi: I think we’ve reached a point where amenities aren’t quite cutting-edge on their own. Certain types of technology can be cutting-edge, but we’re in a market where buyers want value — and nearly 70 percent of our agents recently surveyed told us that for listings that have been on the market for a longer period of time, the home being overpriced is the issue. So, what’s going to be most appealing to a buyer in a home will, of course, vary greatly with taste and needs, but buyers are also seeking what will bring them the most value.
Beth Felsen: Rather than amenities, I see that buyers are seeking location and lifestyle. I find that more and more people in the Hamptons want to be walking distance to the villages and part of a community, and desire a certain lifestyle. The big homes on large properties south of the highway are less desirable to the younger generation of buyers, who prefer to be closer to town and conveniences like coffee shops, restaurants and shopping.
Beau Hulse: Saunas, health and wellness spaces that would include TRX cables. Smart lighting systems, steam ovens, tweens rooms.
What’s the most memorable or unusual request a buyer had this year?
Jack Pearson: Memorable means value — and that is what all buyers want.
Simon Harrison: After 32 years, it’s hard to run into something new or unusual, but it’s a good question. I did have a family ask for a house with no electric bill, which not only speaks to value but a specific interest in renewables. I guess it’s memorable and unusual, because the request wasn’t surprising.
Christopher Covert: I had one customer ask if they could bring their emotional-support goat in the car while we looked at homes! Not sure what else to say about that.
Christina Matos: Although it wasn’t a request originally, I think the most memorable sale this year was that of a log cabin … in the Hamptons!
Ernie Cervi: One of the most memorable buyer requests that an agent of ours had was for a tent to be placed in the backyard for their client to sleep in overnight before buying the house! They wanted to get a feel for the ground vibrations — they were a big believer in energy pathways running through the ground and wanted to make sure there were no negative energy blocks or anything else of that nature. Anything for the client!
Beau Hulse: A request for waterfront property with a boathouse or slip that is covered to protect a 50-foot yacht from the elements.
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