The March 10 headline was a sure attention-grabber: “Luxury home sales plunge 45 percent, with Miami and the Hamptons hit hardest.”
The report, published by CNBC based on data from the online brokerage Redfin, went on to say that Nassau and Suffolk Counties together had a 63-percent drop in high-end real estate sales during the three-month period ending Jan. 31, compared to the same quarter the year before.
Redfin concluded that in a time of economic uncertainty, people were making fewer large purchases; that rising mortgage rates were giving buyers “sticker shock,” and that fast growth during the pandemic had left more room for a decline, among other factors.
But for East Hampton Town’s villages and hamlets, the headline doesn’t tell a complete tale. Yes, sales are down, but it’s because the inventory of available properties is at a historic low, brokers here are saying. Also, the definition of “luxury” is subjective, compared to markets elsewhere.
In Miami and the Hamptons, “these markets are hyper-nuanced,” said Cody Vichinsky of Bespoke Real Estate, which focuses on listings of $10 million and up. The CNBC and Redfin reports “categorize luxury in very low price points, relative to upper price points that both Miami and the Hamptons support. The luxury market that’s over $2 million is a very different market from those in the $20 million range.”
Compared to the last three years, Mr. Vichinsky said, “it is statistically impossible for home sales to not be down. It’s a fact. Look at the market — there were a lot more homes for sale and a lot more purchases. You can’t buy things in quantities that don’t exist anymore.”
In the top corner of the market, what also comes into play, one broker said, is the idea that buying a house is discretionary.
“We’ve got this stalemate between buyers and sellers,” explained Kieran Brew of the Serhant agency. “Our sellers don’t have to sell. Buyers don’t have to buy. . . . It takes the sense of urgency out of the market, and that’s what we’re seeing now.”
Normally, he will have five or six listings on the market at a time, but right now, he has only two or three. “Everyone seems to be off.”
According to data compiled by Serhant, this past January and February sellers listed 152 properties across all price points. That number is down from 176 in January and February last year, 207 in 2021, and 319 in January and February 2020.
“Luxury lags a recession and leads a recovery,” said Dawn Watson, an agent at Serhant. “It still holds true and it’s still important to know. Our prices have not dropped off a cliff — we just don’t have any houses to sell.”
Because of the inventory problem, rising interest rates have not hit the East End as hard as they have elsewhere. Buyers of high-end properties may have a wider asset base, private lenders, or an investment portfolio to draw from, and often make all-cash offers or at least rely less on mortgage lenders. (A separate issue to consider is the recent failure of Silicon Valley Bank and the financial market instabilities that followed.)
“Even with rates being where they are, from historic lows to where they are today, I’m hearing from agents that houses are still going to bidding wars,” said Bill Wright, who owns the Par East Mortgage Company here along with Pattie Romanzi, its founder. “We have a lot of people calling us, from the lower end to the higher end purchase price. The rates aren’t really affecting this market. It’s a lack of inventory.”
In fact, current interest rates may actually be causing homeowners to hold on to their properties. “If people own a home with an interest rate at 2.5 to 3.5 percent, that’s so financially advantageous to them,” Mr. Brew said. “If you own an asset or you’re paying a mortgage at 2.5 percent, and inflation is 7.5 percent, you’re going to keep that money where it is. It’s almost like a savings account.”
Mr. Vichinsky’s view is that the luxury market is in fact starting to stabilize. Don’t compare 2023 to the last three years, he said. Compare it instead to 2017, 2018, and 2019.
“It’s normalized, which is vital for the longevity of these markets,” he said. “During Covid, it was an extremely unusual every-segment, every-price-point type of asset that were all moving uniformly up. Nothing was moving down. So now what we have is a market that is a little more bifurcated, where there’s some normalcy.”
Reportedly, a lot of big deals are still happening. For instance, Mr. Vichinsky said Bespoke has closed on six properties over $20 million — some of them beachfront — since the beginning of the year. And Behind the Hedges reported on March 17 that a 6.7-acre oceanfront estate off Further Lane in East Hampton had sold in January for $91.5 million.
“We’re very lucky to be in a market environment that has the types of sellers and buyers we have,” Mr. Vichinsky said. “It’s not without its challenges, but there’s no better place, in my opinion, to sell real estate. There’s always ups and downs in a market. It never moves in just one direction. . . . It’s just a fact of life.”