Lower interest rates, a rising stock market and aggressive buyers are making this year’s real estate market on the East End one of the hottest in recent memory. The real estate market has been enjoying an increasing number of housing trades, which has brought those awaiting second quarter numbers for 2013 plenty to be happy about. This quarter in the Hamptons, there were 675 homes sold, a 25.5% increase compared to last year. Other numbers in Douglas Elliman’s quarterly report showed that, compared to the first quarter, the second quarter increased in terms of houses sold by a whopping 94.5%.
Paul Brennan, the Hamptons Manager for Douglas Elliman, who has an office in Bridgehampton, has noticed that when it comes to the luxury home market between $1 million and $5 million, buyers are moving with a sense of urgency. “It’s busy in the 1-to-5-million range, but the higher end is at a lull for the moment. Interest rates are beginning to rise, so people are getting into the game before they get locked out,” Brennan explains.
Since banks have kept interest rates low for a long time in order to encourage buying, real estate buyers and investors have taken notice and the early birds have jumped on board. The recent report by Douglas Elliman indicates that the Hamptons is also showing a drop in real estate inventory, which would logically further demand and put pressure on prices to go up. For the second quarter, inventory fell 12.5% compared to last year.
So what happens next? The news of hot prices can continue to attract new buyers, but “if interest rates continue to rise,” Brennan explains, “it will slow down the market until the public gets used to the new normal.”
But there are plenty of talking heads out there who believe that banks will continue the policy of low interest rates as long as the Federal Reserve does the same.
So who’s buying?
Thanks to a thrilling ride on Wall Street this year, investment bankers and Wall Street traders are back inside real estate offices in the Hamptons, looking to invest their money while at the same time enjoy property in one of the most beautiful places in the world, just two hours away from New York City. “It’s mostly Wall Street people who are buying, but I’ve also noticed that there are a lot of Europeans buying as well,” Brennan says.
As far as the slow-down in the super high-end homes ($10 million and up), the lack of action can be attributed in part to the fiscal cliff fears of 2012. “I think that slowness in the high end that’s taking place now is due to the high volume of fiscal cliff transactions that took place in the fourth quarter of 2012. The high end always runs in spurts, so this is very normal,” Brennan says. “It’s a very interesting market, in that currently the majority of the transactions are at the ‘low end’ of the market, which suggests a bottom-up recover versus the top-down. Hopefully that’s a good sign of sustainability.”
Of course, in the Hamptons, the low end is unlike most markets around the world. The median sales price of a home this quarter on the East End was $920,000, which is up significantly from $850,000 compared to last year. And in nearly every sector of the Hamptons market, there were price increases, which is a relief to home owners looking to sell but can leave prospective buyers feeling a little pressure to make buying decisions now so that they don’t miss out on opportunities today that may not be there tomorrow. It’s not a dramatic turn of the table, but the data is suggesting things are moving toward a sellers’ market.