The Hamptons on the eastern end and southern fork of Long Island (stretching from Westhampton to Montauk Point) has been a playground for New York City’s wealthy since the Long Island Railroad brought service to the east-end in the later 19thcentury. Known for its fertile soil, the towns of The Hamptons were once known for their agriculture and orientation to the Atlantic Ocean (Montauk and Sag Harbor were Whaling Villages and Bays. By the middle of the 20thCentury the economy of the area changed from agriculture to leisure including artist colonies, wineries and prime oceanfront commanding in the 7 figures.
Real estate sales in resort communities historically slow when there is concern in the economy as this is truly a discretionary spend. Select brokers with history in the market usually raise concern where their local resort markets begin to show signs of sales weakness (this is also a market where an uptick may predict confidence in the overall economy). News from The Hamptons may be sending a caution signal as follows:
- Home sales have slowed down this year in the Hamptons bringing the median price below the $1m mark. Second-quarter sales fell 12.8 percent from 2017 levels, according to data prepared for Douglas Elliman by Miller Samuel Real Estate.
- The median price dropped 5.3 percent to a $975,000, compared with $1.03m one year earlier.
The spring selling (and summer rental Memorial Day to Labor Day) season is usually the high point of the year in the Hamptons, so the drop is stoking concerns that the resort areas of Long Island’s south shore are succumbing to the pressures depressing property activity in other parts of the US. Of note Metro Denver is not immune as inventory is increasing, demand seems to be decreasing and price reductions are becoming common on listings that are reacting to local market conditions.
Rising mortgage rates are increasing costs for homebuyers of all stripes. Higher-end properties have been affected by the 2016 federal tax reform, which imposed new limits on the deductions of mortgage interest and state taxes — the latter a particular concern in high-tax New York and California. Sales have slowed most in the “Hamptons middle” — homes listed in the $1m-$5m range.
Now the Hamptons is a true microcosm when you consider the following:
The inventory of homes listed at more than $4.25m rose 36.5 percent year on year in the second quarter to 329, according to Miller Samuel. Sales in the luxury market were down 11.6 percent from last year’s level.
According to one broker “We have seen houses listed at $15m brought down to $12m, and maybe trading at $9m or $10m.” The spring saw only one sale closing for more than $20m in the Hamptons — compared with four in the same period one year earlier. The property in East Hampton sold for $40m in April 2018. It had been on the market for two years, and was first listed with a price tag of $69m. That folks is a serious price reduction.