Will this housing market ever slow down?
Will this housing market ever slow down?
In the early days of the pandemic, I thought the Hamptons real estate market would come to a full stop. Similar forecasts trended in the media and many related businesses reduced staff and expenses. We prepared to hunker down, expecting to wait out the pandemic.
How wrong we were
Within just a few weeks, summer people decamped to their Hamptons homes. And soon, Hamptons renters and their first-time neighbors followed. We didn’t foresee people flocking to the area seeking backyards and home offices, freed from their primary home by remote work. But that’s what happened.
Brokers figured out how to do COVID-safe showings (sometimes over Zoom), and rentals were snapped up. By late Spring there was almost nothing left to rent for the season, and it stayed that way for all of 2020.
We were familiar with customers renting when they could not find a house to buy; in 2020, we saw something new: People bought houses because they could not find suitable rentals. But that’s not all. Planning for longer stays, many people with Hamptons homes bought newer and larger ones or enlarged or updated their existing homes. Some families gave up city apartments to relocate to the Hamptons. As the inventory of rentals and sales declined, the infrastructure, businesses, professional and home services were and continue to be stretched by the demands. The dearth of affordable housing has made it difficult for businesses to recruit needed staff.
Another thing fueling the local market right now is that our audience is people, by and large, who have not been hurt financially by the pandemic. They’ve been able to keep on working and have also benefited from record high stock markets. Plus, interest rates are low, so people are taking advantage of “cheap” money while they can. Buying or renting a second home, a place to escape the city, be with family, vacation, work, and study remotely became a practical way to enjoy that extra wealth.
Now, 17 months later, it seems like we’ve hit the breaking point. It can’t get any more crowded, prices can’t possibly be any higher and this can’t go on any longer … well, maybe it can.
Some things may go back to pre-COVID times. Others may not. There’s an awful lot of speculating but really, no one knows when and how things will change, nor what it will look like when they do.
There is just one thing we know.
Markets are cyclical
We know for sure that someday, supply will outpace demand again. Markets always go in cycles. Some industry professionals predict that we’ll run out of inventory and that will soon prompt a reversal, but I’m not convinced. Short of another catastrophe, I think there will continue to be supply — and demand for it. Life events are not market-sensitive. That is, homeowners grow old, get sick, move away, have babies, change jobs, marry and divorce in all market conditions.
As far as market ups and downs go, 17 months is not a long time. The Hamptons market was just coming out of a long slump in the fourth quarter of 2019 when COVID gave it a boost. The pace may slow a bit as developers and builders catch up to demand and as buyers re-calibrate expectations, but demographics, interest rates and economic policies support a strong housing market ahead.
Keep an eye on the rental market
Last year at this time, there was nothing available to rent. Would-be tenants were looking ahead to 2021 and many signed up for the soonest and longest-possible rentals they could find — at really high prices. Then came the vaccines, along with the hope for travel. Seemingly suddenly, requests for rentals cooled down and many wanted to book just through June or July. Around late Spring, landlords who still had availability in August started to reduce prices. Right now, there are quite a few lovely and reasonably priced homes for rent.
I don’t think available rentals foretell an immediate change in the market, but I do think it may result in more sale inventory. I suggested a few months ago that buyers in search of homes would be wise to look at resales. The growing inventory of unrented homes may be an additional source of supply.
In 2020, properties came off the sale market because owners decided or were enticed to rent instead. The offer of immediate cash and being able to hold onto their properties was hard to turn away. But if this slowdown for landlords continues and the sale market remains strong, they might go ahead and put their properties back up for sale, expanding inventory and opportunity for home shoppers.
I should mention here, though, that I’m not thinking ahead to recommend anyone try timing the market. Frankly, the market conditions aren’t going to make a difference in where you’re going to end up unless you're lucky — like you sell your house today and the market crashes next Thursday and you have the cash to buy your dream house. Despite what you hear at dinner parties, that doesn't really happen, and when it does there's usually another explanation.
If you’re wondering whether you should buy, I’ll give you the advice I always give customers: If you are seriously looking for a property and find one you love and can afford, buy it.