This is the final in a three part series on The Hamptons Real Estate Shift.
Today’s buyers are increasingly committed to being in the Hamptons long term. While the desire to purchase is still strong, as discussed in The Hamptons Real Estate Shift, Part 1, these buyers have re-envisioned how they want to use their homes and, as we saw in The Hamptons Real Estate Shift, Part 2, not only have adjusted their searches accordingly, but also their bids and approach to negotiation as a result. Meanwhile, listing supply has been decreasing.
Supply decreased 20% from January 1 to May 1, but only by 2% from April 1 to May 1. New listings to market increased 78% overall in the last four weeks compared to the previous four weeks of March 8 to April 4. However, supply is still strained, relative to demand, as indicated by the continued decrease in supply compared to the recent increase in new listings.
The type of listing matters more to buyers now than it did to the emotionally charged home purchasers of 2020 and there is still a scarcity of product. In a market that has continued to tighten for more than six months in a row, buyers and sellers with disposable income are increasingly coming head to head and trying to use the options that this kind of income provides against one another. Which makes for a really interesting Hamptons real estate market as we approach the summer season.
“I’ve had sellers who, when we didn’t receive offers, they attributed it to the price being too low and wanted to increase their price,” says Mala Sander of the Corcoran Group. According to Sander, these sellers are reading the national headlines and looking to buy in other markets, like Florida, which are also increasing in pricing and low on supply. The sellers see what is happening in other markets and equate it to the Hamptons.
“It comes down to the trade,” explains Sander. “When someone is looking to sell their home and the market they want to buy in is also a quickly improving market, even when the Hamptons home is worth more now than it ever was before, the trade can feel like it makes less sense financially, which unfortunately can overshadow the personal goal.”
The Hamptons real estate market is getting quieter, but there are still plenty of serious buyers with long term interest looking. Between a lack of quality product and having to contend with sellers who also have options, these buyers are having a tough time finding their ideal Hamptons home and they’re exhausted from the search.
“It’s not just the buyers that are exhausted, but the agents are as well,” reports Nanette Hansen, Brokerage Manager of Sotheby’s International Realty in the Hamptons.
The number of contracts signed and trades recorded continue to set historic record highs. However, many agents have shared with Hamptons Market Data that, over the last couple of months, they are now seeing cases where early listing activity calls for a sealed bid, yet only one or no bids end up being submitted.
Other contract terms, such as remedying compliance issues and working out closing time frames, have caused some deals to recently fall apart.
“The buyers are starting to feel like they are overpaying; however, a premium will be paid for new construction or turnkey properties since the cost of construction has increased tremendously,” says Shannan North of Brown Harris Stevens.
Buyers have set tighter limits on how far they are willing to go. They are also getting clear on what type of property they are willing to go to greater lengths to purchase. For the lucky buyers who find an available home that they love, they are still going above and beyond to secure the deal, including offering incrementally more than today’s market value. Regardless of the type of buyer or what they are looking for, the emotional and irrational buying is over and buyers are more cautious.
In addition to buyers’ stronger resolve to hold out for the right property, agents also report that the influx of new buyers experienced in 2020 has slowed to a trickle. Though there are still plenty of buyers circling the market, it seems that what we see now is pretty much what is left of the backlog of the COVID rush. Once inventory satisfies this buyer pool, it could likely be a return to normal market cycles, but not necessarily a decrease in pricing.
This wasn’t a financial bubble. It was a lifestyle change supported by real wealth and there likely won’t be a need for people to offload these purchases due to a financial crisis the way they needed to in 2008. This offloading is what caused prices to plunge. Instead, Hamptons Market Data and many local agents tend to agree that while it is likely some of 2020’s emotional buyers may end up selling sooner rather than later, as more people get vaccinated and more of the country opens up, a mass rush to sell doesn’t seem likely when considering all conditions together. Time will tell.
In the meantime, Hamptons Market Data has noticed what appears to be an uptick in trades recorded that never made the listing databases, and we started paying closer attention to listings that were going into contract within 10 days.
“These are agent to agent trades, or trades involving Non Disclosure Agreements” reports Hansen. “True off market trades remain the exception, but what we see happening now is the market is moving so fast, local agents, regardless of the brokerage they work with, are communicating and collaborating directly with one another more now than ever before.”
In ramping up on this collaboration, agents are often able to measure serious interest before a listing goes live on the internet, often resulting in helping the seller and buyer achieve their goals quickly and quietly. In a market where everyone is exhausted, this method of sale has become increasingly appealing to both buyers and sellers.
Agents have adjusted how they work the market for their clients. “I have to pick up the phone to find listings,” confirms Sander. “Our listing data is not accurate. Actually, it’s quite horrific. I get phone calls from other agents with buyers asking if I have any new listings coming to the market soon, but I also will call agents who I know have ready and qualified buyers when I’m preparing a listing for the market.”
According to Sander, calling agents who she knows has serious buyers helps to weed out people who aren’t serious or may unnecessarily complicate the sale process.
Today, it is in a seller’s best financial interest to put their property on the market and allow all interested buyers to view and consider a bid on the property. However, for many serious sellers who already have their next step planned, and may have timing concerns of their own, a quick, easy and secure sales transaction can often be more valuable than the marginal price increase they may (or may not) get by putting the house on the market. There are serious players, but there are also a lot of fickle buyers and sellers, which is fairly typical for the Hamptons outside of current market conditions and this occurs mostly due to the options available for many buyers and sellers mentioned previously.
Fickle buyers and sellers mixed in with the serious ones, a fast moving market, inconsistent listing data, and fatigued market participants have caused the Hamptons real estate market shift #3: Agent-to-agent trades.
“It’s a close-knit community. We all know who sells properties, for example, in East Hampton. I call those agents when I have a buyer for that area,” explains North. Agents all shared the same feeling; picking up the phone and speaking with colleagues in the spirit of collaboration feels good a year plus into social distancing. “It’s an especially good feeling when we can also get a deal done for our clients that everyone is happy with,” she adds.
Buyers and sellers are certainly benefitting from agents leaning in to one another more. “I don’t know of one case where someone has won a bidding war and has buyer’s remorse,” reports Hansen, citing that by now she would have expected to hear of at least a couple of cases. Hansen also shared comments delivered last week by Nicole Kidman to an audience of 10,000 SIR agents at the brand’s annual Global Networking Event, hosted entirely virtually for the first time, due to Covid .
According to Hansen, Kidman said she and her husband, Keith Urban, recently made significant enhancements to their home, and while pre-COVID opinion might have deemed it “over investing in a property,” for their family the result is priceless. Investing in improvements to their home gave Kidman a greater sense of enjoyment, of feeling grounded & safe in an uncertain world, while adding value to one of their most important assets- their home. Hansen explained that many of today’s Hamptons buyers and homeowners are feeling the same way.
Though it appears the tide has shifted in terms of a quieter, less harried buyer interest, it is still a seller’s market and buyers have one more thing they can do now that didn’t necessarily work in their favor a few months ago.
In the fall and winter, buyers would reach out to Hamptons Market Data for guidance bidding on a property directly without an agent. At the time, buyers felt this was in their best interest, as many had experienced what they described as missing out on a home due to sellers favoring a listing agent’s direct buyer. For many, entering the negotiation without an agent did work to secure the next property they bid on.
However, with the nature of the market having shifted over the last few months, Hamptons Market Data believes that the best opportunity serious buyers in today’s market have to secure their Hamptons home is to work with a well connected local agent. Not all listings make it to the internet or even the listing database, but they almost always make it into the agent community.
In today’s real estate market, where listings are hard to find and negotiations have gotten more complex, getting a heads up on new listings, followed by professional and experienced guidance on how to approach a particular seller in a negotiation, could very likely be the difference between securing and losing the deal.
For more information on working with a local agent or to find the right agent and brokerage for you, feel free to reach out to Hamptons Market Data at firstname.lastname@example.org.