Last Friday’s report on US economic growth drove President Donald Trump to Twitter for yet, another victory lap after it showed gross domestic product grew at a 4.1 percent annual rate — the quickest in nearly four years. However, the figures had an unpleasant detail deep within that Trump did not want to share: Residential investment, which included construction and brokers’ fees, contracted in the second quarter. Compound this with a housing affordability crisis, and Jerome Powell rocketing the federal funds rates higher before the next recession, it is a perfect concoction for a nasty slowdown sometime in the not too distant future.
From London to Sydney and Beijing to New York, real estate markets in some of the world’s most expensive cities are peaking. In this report, we examine the slowdown seeping into the South Fork real estate market, otherwise known as the Hamptons.
As the bubbly may be flowing in Southampton this summer, second-quarter sales plummeted 12.8 percent from 2017 level, according to data prepared for Douglas Elliman by Miller Samuel Real Estate. The median home price dropped 5.3 percent to a $975,000, compared with $1.03 million last year.
The report suggested that homebuyers in the region should not panic (yeah, sure.), and residents should look at other metrics, including growth in the $5 million to $8 million range.
“There is a downward correction in Hamptons market,” said Carl Benincasa, a Douglas Elliman regional vice president of sales, who spoke with Southampton Press. “Buyers are always aware of it before sellers. But now the sellers are finally figuring out where buyers are and they are making the adjustments they need to meet them. That’s why you are seeing prices drop; that’s why you are seeing houses are being sold faster; that’s why you are seeing listing discounts go down: because sellers are pricing their homes more reasonably.”
Mr. Benincasa indicated that the second quarter serves as a “transition period” when buyers and sellers are coming together with a reasonable agreement about price, and he expects many more transactions in the third quarter.
“One of the characteristics of the high-end housing markets around the region, whether we are talking about New York City or the outlying suburbs, is a sales decline,” said Jonathan Miller, the president and CEO of Miller Samuel, “and the Hamptons is no different.”
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The report specified that sales activity of homes in the $1 million to $5 million price range (“Hamptons middle”) took the hardest hit, which accounted for a majority of the quarter’s loss.
“But the 10-year quarterly average is 474 homes sold—Q2 2018 was 601; Q1 2018 was 441; Q2 2017 was 689—sales are not necessarily low in the Hamptons. The Hamptons is known for the luxury market. While the overall inventory of the Hamptons is steady or declining, the actual inventory in the luxury market, meaning the top 10 percent, jumped and is continuing to rise.”
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— Hamptons Luxury Agents (@HamptonsAgents) July 30, 2018
In a separate interview with the Financial Times, Miller also said: “The middle is where you have more leverage being used in acquisitions, so rising mortgage rates