An Inflection Point In The Hamptons Market?

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After increasing in the fourth quarter of 2021, the construction of new homes fell 4.1% nationally in January thanks in part to supply-chain issues and a labor shortage. If you get caught in the ‘trade parade’ on 27 in the morning you have to wonder if these woes have entered our little bubble.

The Fed has kept rates at historically low levels for years now in response to the credit markets falling apart in 2008. They recently indicated broad support during their January meeting to begin raising rates amid growing concern over the rapid increase in consumer prices due to the global pandemic and its effects on the supply chain. The Fed Funds rate is going up….

The Hamptons is a unique microcosm in the real estate market in the US. Nowhere else is there a market more actively followed and traded by ‘smart money’. While it does feel sometimes that it has become a bit overly commoditized, in the end these ‘investments’ are for most people their homes that they enjoy with their families and friends (albeit often second homes).

The demand for property out east had been fueled in this recent cycle due to Covid and the flight from NYC. With this latest variant tapering off and the general exhaustion of the population of hiding from the virus its clear that this continued demand is largely based on low rates. Even with the projected series of rate hikes in 2022, we will still end the year near historical lows. A bit of a tempest in teapot if you ask me.

Unfortunately, Bloomberg does not have a chart specific to Hamptons home prices. If it did it would show that there are normal fluctuations and that markets rise and fall. Shocking I know. This may sound silly but I say to anyone who will listen that it is a great time to sell and a great time to buy. Hear me out.

Sellers will benefit from the 40 plus percent pop in prices due to the Covid effect. Take your money and run! Good for you. We most likely won’t see prices this high in 18 months’ time so why not take some risk off.

Buyers will certainly question paying the high and that is understandable. That said, if they are ‘in it’ for the next 10 years they will benefit from borrowing money cheaper than inflation. The market will inevitably go higher in the long run and most importantly they will be able use and enjoy their new home for years to come. Additionally, the Hamptons remains one of the few markets in the United States where you can rent your home and very often be cash flow positive. Renting for say just the

For the last 24 months we have seen inventory continue to decline. Open houses are a chaotic nightmare. The ‘winter break’ for real estate lasted for about a day and a half… That said, for the last three weeks now we have seen a few more listings come on than normal and there are a few less closings than new listings. A metric the local realtors follow closely.

An inflection point?

Michael Petersohn is an agent with Brown Harris Stevens of the Hamptons

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