Any realtor worth their salt will tell you, when it comes to the home-buying habits of wealthy hedgies and bankers, gaudy McMansions and sprawling estates are so last season.
Or, as they say in Greenwich: “Small is the new big.”
Owners of large homes in tony Hamptons neighborhoods hoping to cash in on a frothy housing market before the inevitable rise in mortgage rates will be disappointed to learn that the trend of buyers favoring lower-priced homes continued in the third quarter, according to the latest Douglas Elliman Real-Estate Report. This left the high end of the market in a double-bind as supplies of new homes hit the market while sales tapered off…
Purchasers agreed to pay more than the asking price in 10 percent of deals for properties under $3.3 million — this quarter’s definition of “non-luxury” homes, making up the bottom 90 percent of the market, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest share of transactions with bidding wars since the firms began tracking the data in the second quarter of 2016.
In their zeal for lower-end deals, buyers snapped up condos as well. Those units — with a median sale price of $567,500 — were available for just 97 days on average before going under contract, the fastest clip in six years of record-keeping. On the high-end, buyers showed less interest in acquiring luxury homes than sellers did in listing them. Inventory in that top 10 percent of the market jumped 22 percent, the biggest pile-up in two years.
“The market is looking towards those smaller, more manageable homes,” said Carl Benincasa, a regional vice president at Douglas Elliman who oversees sales in the Hamptons. “That’s certainly been a trend we’ve been observing.”
Bloomberg, which obtained an advance copy of the report, noted that the Hamptons housing market often parallels performance in the financial industry, seeing as many buyers of luxury homes out east are wealthy finance types.
With markets at record highs, the Hamptons housing market is doing reasonably well – but buyers’ unwillingness to snap up the most expensive homes in a way mirrors the trepidation surrounding stretched stock valuations and record low volatility.
With stocks at record highs, people are in a buying mood in the Hamptons. The beachside towns on Eastern Long Island, whose fortunes are closely linked to the performance of the financial industry, had 517 total sales in the three months through September — or 12 percent more than the 10-year quarterly average, Miller Samuel and Douglas Elliman said. Even with all that buying, inventory declined only in the non-luxury category, with listings dropping 10 percent from a year earlier to 1,143.
Deals for less than $500,000 fell 12 percent to 57 — because there weren’t many such properties available, Town & Country Real Estate said in its report on Hamptons. But sales of homes priced between $500,000 and $999,000 jumped 22 percent to 131, and those between $1 million and $1.99 million climbed 12 percent to 76, the brokerage said.
One realtor noted that inventory is thinnest in the under-$1 million category, which has forced some buyers to the next rung of the market.
“When you look at the inventory under a million, that’s the largest shortage, so buyers stepped up to the next level of the market,” said Ernest Cervi, a senior vice president at Corcoran Group, which released its own report Thursday.
One couple recounted their struggle finding a new home in the Hamptons for under $1 million after selling their old home for $1.4 million.
For Brian DeSesa, it was much easier to sell his under-$2 million home than it was to buy one in that price tier. Sensing the market demand for lower-cost properties, he and his wife listed their three-bedroom Sag Harbor Village house in June at $1.45 million. It went into contract in July, to a buyer offering $1.35 million but willing to pay all cash and close within 14 days, said Jessica von Hagn, the Brown Harris Stevens broker who marketed the property.
Then came the hard part: finding a new house in the area for less than $1 million. The couple bid on at least three such properties, offering the asking price each time and getting outbid within hours, said DeSesa, 36, a land-use attorney with the Adam Miller Group in
Bridgehampton. On the next try, they offered the $795,000 asking price on a ranch-style home — and then, in a second round of bidding, offered $860,000, which won them the deal.
“It’s pure competition,” von Hagn said. “At the $1 million mark, you’re competing with year-rounders trying to live out there, you’re competing with builders who are going to tear it down, and you’re competing with flippers.”
To be sure, there were still some ultra-luxury deals in the quarter, including two for more than $20 million, the same as a year earlier, Bloomberg reported. Purchases between $5 million and $9.99 million plummeted 56 percent to just 11. Sales were up 30 percent in Bridgehampton, with six deals over $10 million, but plunged 29 percent in the Sag Harbor area, where none of the 17 transactions were for more than $5 million.
Of course, as we noted last quarter, “smaller” in the Hamptons is purely relative, because apparently there’s nothing more modest among today’s Hamptons set than trading a 13,000 square-foot home for an 8,000 square-foot home.