Declining Hampton Home Prices Amid Limited Inventory for Sale

Home prices in the Hamptons, the sought-after resort at the end of Long Island favored by Wall Street brokers and bankers, experienced a decline in the first quarter. Buyers opted for more affordable properties due to the shortage of homes for sale, as reported by Miller Samuel and brokerage Douglas Elliman Real Estate.

The luxury second-home market witnessed a significant drop of 28.9% in average home prices during the second quarter, amounting to $2.19 million compared to a record high of $3.08 million in the first quarter. Jonathan Miller, CEO of Miller Samuel, commented on the decline in sales, stating that it is not solely due to mortgage rate spikes and economic uncertainty. Economists have been predicting a recession for the past two years. He further attributed the sluggish sales to the severe lack of inventory.

According to Miller, available inventory has increased by 6% compared to the peak buying period after the pandemic. However, it still remains 62.7% lower than pre-pandemic levels in the second quarter of 2019, resulting in limited housing options for buyers. Miller emphasized that the scarcity of homes for sale has contributed to the subdued sales activity.

Bidding wars have driven up prices, with one in five closings in the second quarter exceeding the asking price. This trend marks a decline from the all-time high in the previous year when one in three homes sold above the asking price.

Although the median price shows a 9.4% decrease from the all-time high of $1.6 million, the current median price stands at $1.45 million, reflecting a substantial 70.6% increase compared to pre-pandemic levels.

Miller pointed out that many homeowners are holding onto their properties due to the lower interest rates they secured in recent years. Homeowners with 3% mortgages are hesitating to reenter the market and potentially face higher rates in the range of 7%.

The limited inventory has translated to fewer housing options, particularly impacting the top-tier segment of the Hamptons market. The average prices for the priciest 10% of homes, those selling for $4.4 million or more, have significantly decreased, dropping from $12 million to $8 million compared to the previous year.

Miller attributed the decline in prices to the shifting product mix. He stated that the high-end inventory has been sold off during the previous boom period.

During the second quarter, the number of homes sold in the $5 million or above category decreased from 56 to 21 compared to the previous year. However, Miller noted that demand remains strong, with bidding wars reaching a record level of 30.8% in the top 10% of the market, up from 27.3% a year ago.