Hamptons Sellers Should Ride the Buyer Wave Before it Breaks
The real estate market in the Hamptons has undeniably benefitted from the Covid-19 pandemic, with 2020 home sales hitting a 15-year high, and a seemingly endless stream of demand from high-end buyers seeking spacious safe havens to own instead of rent.
And with much of the lingering inventory in the area—located on the eastern end of Long Island in New York—snapped up and off the market, for sellers, there’s practically never been a more opportune moment to list.
“If I were a seller, there really is no better time to sell than I can possibly imagine,” said Ginger Thoerner of the Clark + Thoerner Team with Sotheby’s International Realty in the Hamptons. “I’ve never seen a more frenzied market—we saw around $5.5 billion in sales in 2020, more than 2018 and 2019 combined.”
A rapid decline in listings has brought inventory to record-low levels,“which is really our biggest issue across all price points,” Ms. Thoerner added.
Though demand varies depending on price range and property type, even properties that had previously sat unsold on the market have transacted over the past year.
2020 “took a lot of inventory off the market that had been sitting for some period of time,” said Tim Davis, a Southampton-based Corcoran broker. “It was a cleansing of the market, if you will.”
Bidding wars are now commonplace, while low interest rates and a tight rental market have combined to drive demand even higher.
“Probably 30% to 40% of listings have gone into bidding wars,” said Hara Kang of the Hamptons-based Atlantic Team at Douglas Elliman. “After one week we’ll have three to five offers bidding for a property. It’s not a great time to be a buyer, but it’s a fantastic time to be a seller.”
While buyers are still unwilling to meet overly ambitious listing prices, for most sellers, the biggest obstacle to listing is the question of whether they’ll be able to find another Hamptons home to move to, not whether they’ll be able to get a good price for their current property.
Here’s what to know before diving into the frothy Hamptons sellers’ market:
Inventory Is Likely at a Low Point
Beyond the near-unprecedented buyer demand, the biggest factor currently working in favor of would-be Hamptons sellers is the staggering lack of inventory on the market.
“Last year pretty much wiped out all of our inventory,” Mr. Kang said.
This is particularly true in certain price points.
“The most difficult price range to be in as a buyer is between $5 million and $10 million,” Mr. Kang said. “From Montauk to Southampton there’s nothing. Sellers [in that price range] are just not pulling the trigger, and they have nowhere to go for the year unless they want to downsize or upgrade. I tell them, ‘you may want to wait until the fall to find something.’”
The current state of inventory could be particularly beneficial to sellers sitting on older properties, provided they’re willing to play ball on price. Throughout the pandemic, demand has been strongest for new construction and turnkey properties, with few buyers interested in a renovation or construction project. But the lack of other options may turn their heads toward fixer-uppers they might not have previously considered.
“Once the new construction was absorbed [last year], people went back to [re-sale] inventory,” Ms. Thoerner said. A more favorable environment for resale properties also meant that even homes that had previously languished found buyers. Some listings that have sold “dated back to 2015, stuff that was just lingering on the market, either it was overpriced or just needed a lot of work.”
A flurry of new development is currently underway, which could increase competition among sellers later on in the year.
“Builders, investors and developers have been on a buying spree for every teardown and piece of land they can get their hands on,” said Christopher Covert, a broker with Compass in the Hamptons. “In six months, we’re going to see a flood of new construction coming on. And I think that’s going to alter the market, and sellers are going to be back in second position, because new construction is going to top the list for everybody.”
Expensive Rentals and Limited Options
In the initial rush toward Hamptons properties when Covid-19 started spreading in New York last spring, many existing rentals were scooped up by long-term tenants, and owners who might normally rent out their homes opted to take up residence indefinitely. The combined effect? Few options remained on the market for would-be tenants, and rental prices rose so high that buying began to make more financial sense.
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“Compared to two years ago, rental rates are up 50%,” Mr. Kang said. “It’s a crazy number and people are paying it. But they think, we’re spending $200,000 or $300,000 on a rental, why not put that into a down payment to purchase a home?”
Historically low interest rates are driving more buyers into the market, as well.
“People who would traditionally make their homes available as rentals didn’t leave, and demand far outstrips inventory, so rental pricing is insane,” Mr. Covert said. “Mathematically, it makes no sense. I would much rather pay a 2.5% loan than what I’m seeing in rental prices.”
Once vaccines are more widely distributed and travel becomes more accessible, this dynamic may no longer be in play, and sellers won’t have as strong an advantage.
“There’s going to be a glut of rentals in the Hamptons next summer, as people say, ‘I’m going to travel for the month of August, let me put my house” on the market, said Timothy O’Connor, an agent with Brown Harris Stevens in the Hamptons. “Right now, the rental market is very strong with limited inventory. Next year, they’ll be a dime a dozen.”
Rising Prices and Lightning-Fast Sale Times
After nearly a full year of frenzied demand, Hamptons home prices have inevitably increased, and for desirable properties, time on the market can be blink-and-you’ll-miss-it, with some properties going into contract within two weeks of listing, according to brokers.
The average Hamptons home sold for $2.35 million in 2020, 24.2% more than in 2019, according to the most recent market report from Brown Harris Stevens.
“I was also an all-time high for year-end average prices,” said Jennifer Friedberg, an agent with Brown Harris Stevens/Luxury Portfolio International in the Hamptons. (The median was $1.35 million in 2020, according to the Brown Harris Stevens report.)
While buyers are willing to pay top dollar, they’re not willing to pay prices that don’t track with the rest of the market. “Because money is so cheap, people are financing, and the house still has to appraise,” Ms. Friedberg said.
For sellers, then, the trick is finding the sweet spot of ambitious pricing, a calculation that will vary depending on factors including location, property condition and price range.
“There’s definitely an efficiency to the market here. It’s a very educated buyer pool,” Mr. Davis said.
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