(Bloomberg) -- An elegant 5,500 square-foot home set on nearly four acres in Bridgehampton came onto the market almost exactly a year ago with an asking price of $21.9 million. After what Zillow shows is three price cuts, it’s down to $17 million and is still unsold.
One hamlet over, in Wainscott, a massive 10,000 square foot mansion on about 14 acres overlooking Georgica Pond hit the market last year for $70 million; its price was subsequently cut more than 14%, to just under $60 million. It also has yet to find a buyer.
The Hamptons Covid-era buying frenzy is a thing of the past. “It’s certainly not gangbusters like it was,” says Paul Brennan, a broker with Douglas Elliman. “Things have slowed down. There’s still lots of activity, but people are not pulling the trigger as quickly as they did a few months ago.”
May’s sales numbers were lackluster, according to an Elliman report, with new signed contracts for single family homes down 38% from last May, even as 14% more listings came onto the market. The numbers for June aren’t out yet, but analysts and brokers say it isn’t getting better.
“The market is transitioning,” says Jonathan Miller, president and chief executive officer of the appraiser Miller Samuel. “What’s happening in the Hamptons seems to be happening throughout the country.”
But unlike most US housing markets, the Hamptons is mostly second homes which are bought, occupied, and sold by some of the richest people in the world—people who at least in theory can pay cash rather than worry about mortgage rates.
“The market out here is a little different than the rest of the country,” says Douglas Elliman broker Martha Gundersen, who represents the $60 million Georgica Pond listing. “A lot of purchases aren’t contingent upon mortgages, and [buyers] can always get private funding.”
And yet, even the richest buyers have tended to take out loans. “I find it’s at almost every price level,” says Corcoran broker Gary DePersia. “After the contract is signed, no matter what, they’re getting financing. They don’t want to take the money out from where they have it to buy a house.”
And so the end of cheap mortgages has, brokers say, begun to impact the spending habits of those who don’t need one.
“You have to feel very good about the world and your economic situation to go out and buy a second home, which very often can be more expensive than your first,” says DePersia. “It’s not so much about interest rates as it is about [buyers’] general feeling of well-being.”
The market could slide further before it stabilizes, since sellers have yet to recognize buyers’ new reality. “The inventory doesn’t match buyers’ expectations,” says Gundersen. “Let’s say they were getting a 2% mortgage, now they’re getting 5%, and there’s a disconnect for what their monthly costs will be.” Sellers, meanwhile, “are still looking at the most expensive” comparisons when they go to price their house.
Inventory, meanwhile, is set to rise. “There will be more [houses] coming onto the market, and as more comes on, [sellers] will have to take a price concession,” says Brennan.
Current closings, he adds, are mostly holdovers from when people committed to a purchase during the boom market. “That residual effect will maintain itself for probably another two to three months,” he says. “The money that was in the pipeline will dry up, and then we’ll see what happens.”
There isn’t a single tier of the market, brokers say, that could be immune.
“It’s across the spectrum,” says Gundersen. The only exception? “If you have a house that’s in really, really good condition and it’s on the water, and there’s acreage and a dock and a tennis court, and it’s one of a kind and it’s priced well, you don’t have to reduce it. You’ll sell it at or maybe slightly below the current ask.” That said, she continues, “during Covid if it was priced correctly and had all those things it would go into a bidding war. Now, bidding wars are not happening unless the house is dramatically underpriced.”
Looking Toward August
It’s not all doom and gloom. DePersia says demand is still there.
“June in particular is not a particularly good gauge of anything,” he says. “Most of the serious buyers looking to buy a house have bought one already—if they buy a house in June, there’s a very good chance they won’t have it before summer’s over. So the big motivation to buy at that time of year is gone.” Come August, he promises, “things will ramp up again.”
He acknowledges things have slowed down from where they were a year ago but says he still has active buyers. “Today I put a house on the market in the $8 million-plus range, and already I had three brokers call to show it,” DePersia says. “And it’s not inexpensively priced.”
Gundersen points out that unlike in 2008, “we’re not in a banking crisis, so we’ll still have a healthy real estate market, just not as crazy as the last few years.”
And yet, she says, past performance might be a decent indicator of future results. “If I could predict the future based on experience, [the Hamptons market] is going to slow down before more inventory comes in, and a lot of buyers are waiting for the fall to buy.”
Still, she adds, “price your house to sell right now and you’ll get a buyer. A good deal is always a good deal.”
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