Zerohedge readers have discovered that luxury real estate markets across the country in the last several years - have fallen into a slump. Our core focus has been Manhattan, Greenwich, and the Hamptons, along with West Coast cities.
A new report by appraiser Miller Samuel Real Estate Appraisers & Consultants, confirms that lavish vacation homes in New York’s Hamptons remained under pressure as 1Q19 sales declined to their lowest level in years.
Demand for the most expensive properties (above $10 million) collapsed to a six-year low between January and March. However, demand picked up for the lower end market. About 59% of all 1Q19 Hamptons sales were from homes under $1 million.
Appraisers said the tax overhaul passed in 2017 soften demand by capping deductions for mortgage interest and property levies and made vacation homes more expensive on eastern Long Island's South Fork.
"We are in the middle of this transition period post the new tax law, where the high end is struggling," Jonathan Miller, president of Miller Samuel, told Bloomberg in an interview. "What’s actually selling is shifting much lower so there’s more inventory exposed."
Across all price levels, sales in the Hamptons have declined five straight quarters. This has led to an overall decline in the median sale price of homes, down 5.5% versus the same period a year ago. About 300 homes changed hands in 1Q19 was the lowest sales transactions for the first quarter in seven years.
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The appraiser said the slump in activity would take nearly seven-and-a-half years to sell all mansions currently listed at the current pace of sales, the longest stretch in appraiser's records.
Ernie Cervi, senior vice president at brokerage Corcoran Group, said home sales should increase in 2Q, now that tax season is complete, mortgage rates have dropped and volatility in financial markets has declined. The added supply is expected to push home prices lower as buyers gain the upper hand.
"Price adjustment is the trigger," Cervi said. "That’s what brings people back into the market."
The wealth of the Hamptons real-estate market is closely correlated with those of nearby Manhattan, another real estate market that is quickly cooling.