Posted on Thursday August 8, 2019 1:37 AM
by Joseph Kazickas No Comments »

The Hamptons real estate market continues to deflate with non stop price reductions ranging, at a clip, from 10% to 25%. Market data has been widely publicized. Here are links to the Miller Samuel and Judi Desiderio’s market reports for first half 2019. It’s grim. Especially at the market’s higher end.

There are a number of reasons for the current situation, ranging from over speculative building, the emergence of two wage earner families, changes in tax law, and the dependence upon rental income to defray the cost of leveraged ownership.

At the markets highest end the inventory bulge is ominous and at current absorption rates will require over three years to digest, despite significant price reductions. New construction is especially under pressure.

Changes in the way we work and live has had a profound effect on the Hamptons rental market. I well remember meeting the Long Island Rail Road’s CanonBall Express, in East Hampton, with countless other kids, to welcome Dad out for the weekend. Moms and children luxuriated in the summer rental. No longer. The advent of the two wage earner family compromised this picture, resulting in shorter term rentals.

Losing the longstanding federal tax deduction of state and local taxes, combined with limitations on mortgage interest deductibility, have also had a significant impact upon the economics of second home ownership. The loss of these deductions has had an inordinate impact upon high tax states such as ours, and easily tips the balance between a sensible investment in real estate, to one that doesn’t appear so. Especially as values weaken.

It’s hard to find a reason for suggesting the Hamptons real estate market will recover anytime soon. But there is a silver lining to every cloud…especially if you are in the market to buy.