Homes are flooding the market in the Hamptons
- Home sales in the Hamptons slumped for a fourth consecutive quarter as inventories swelled to their highest level in more than a decade, according to a report.
- A mismatch between residential-real-estate activity and the rest of the economy may be worsening the slowdown, said Jonathan Miller, CEO of Miller Samuel, a real-estate-consulting company.
- Unfavorable conditions, such as volatile mortgage rates and the new federal tax law that capped housing-related deductions, are also pulling down sales, he said.
Home sales in the Hamptons slumped for the entire year of 2018 as inventories swelled to their highest level in more than a decade, indicating the US housing market is falling deeper into a weak stretch.
According to a new report published by the real-estate company Douglas Elliman, home sales in the Hamptons plunged 34.8% year-over-year in the fourth quarter to 360 units, booking the fourth consecutive quarterly decline. As a result, inventories swelled by 81.9% to 2,197 units, the highest level since the firm began tracking the data in 2006."Like the city, Hamptons sales fell year over year each quarter in 2018 as the market reset," Jonathan Miller, CEO of Miller Samuel, a New York-based real estate consulting company, told Markets Insider.
A mismatch between residential-real-estate activity and the rest of the economy may be worsening the slowdown, according to Miller. The US economy is humming, with unemployment at multi-decade lows and average hourly earnings gaining at an unprecedented speed. Despite strong economic metrics, US home inventories are sitting at their highest level since 2011.
"Sellers remained anchored to the stronger market conditions of the past few years and their confusion over the disconnect between the housing market and the US economy," Miller said.
He added that volatile mortgage rates are causing home buyers to have a wait-and-see attitude. In November, the average rate on a 30-year, fixed rate mortgage rose to 4.94%, the highest level in seven years. While the rate has declined a bit to 4.45% now, it's still above the 3.9% from a year ago.
And the new federal tax law that capped housing-related deductions is also pulling down sales, according to Miller. In December 2017, President Donald Trump signed the Tax Cuts and Jobs Act, which curbed mortgage-interest deductions and placed a $10,000 cap on state and local tax deductions. It essentially wiped out some provisions that were designed to encourage Americans to own homes.
It's not all bad, however, as the unfavorable market conditions haven't discouraged the super wealthy from buying homes in the Hamptons. According to the Douglas Elliman report, luxury Hamptons sales at or over $5 million reached their highest market share in three years as the average price jumped 14.6% YoY to $8,588,288.
Gina Heeb contributed to the story.