By Diane Saatchi
In early 2016, I published a blog post, Reflections: a look back at the year in real estate.
That was three years ago (can you believe it?), and many things haven’t changed.
The rental market is still perplexing, increasingly reliant on online home-rental sites. Most of the towns have rental registries now, and they’ve turned out to be inconvenient but ultimately not problematic for business. Sag Harbor’s Watchcase Factory is still welcoming residents, and Bridgehampton is still without a CVS. The record-breaking $100M+ sale has yet to be topped. The under $1M market continues to be strong.
Some things, however, are looking a little different.
The real estate market outpaced the stock market
We‘ve gone from a seller’s market, with so little inventory buyers who stopped to think or blink missed out, to a buyer’s market, where there always seems to be another house around the corner. “Let me know when something else comes on the market,” buyers will tell us, or “let’s watch this house and see if the price drops,” or just “keep me posted.” There doesn’t seem to be any urgency.
It’s been 10 years since 2008, and such a change was due. The odd thing about it is for the first time in my memory, our real estate market got ahead of the stock markets. We slipped into a buyer’s market late in 2017, and the Dow held up almost a year longer.
We won’t know for sure how 2018 turns out until the end Q1, when most of the 2018 sales will be reported, but so far, I think it’s safe to say that 2018 will be remembered for its price corrections, and for its growing inventory.
While we don’t track year-to-year inventory, this theory comes from the sheer number of for sale signs and open houses, and the fact that value-priced properties, at all price points and locations, found buyers. Despite the growing inventory, I can’t say that the real estate market has been especially slow or bad; volume of trades and the total dollar amount of transactions are probably not much off the highs of past years.
There’s a sense of hunkering down, and becoming more budget-conscious
We can’t talk about increased inventory without touching on The Tax Cuts and Jobs Act. The new set of tax laws was signed last December, and I wouldn’t be surprised if it contributed to homeowners deciding to put their Hamptons home — often their second — on the market, and to buyers having second thoughts or ramping down their budget and expectations.
Think of it this way: Because state and local income taxes are no longer tax-deductible, and because homeowners can no longer deduct more than $10,000 of property tax each year, it’s become much more expensive to own a second home.
In actual dollars, if a New York State resident owns two homes and pays say $70,000 in property tax, they’ll bring home about $35,000 less after taxes. Additionally, now that state and local taxes are no longer deductible, for every $100,000 of taxable income, resident high-income earners realize almost $10,000 less. All other things equal, the tax law is costing a resident with two homes, $70,000 in property tax and an annual income of $1,000,000 more than $11,000 per month.
How can you make up $11,000 a month? Perhaps by reconsidering the second home.
A quiet neighborhood is beginning to heat up
After a few years of Sag Harbor, Amagansett, and Montauk outshining the rest of the Hamptons (although they’re still hot), East Hampton seems to be picking up. Homes north of the highway, in and near East Hampton Village, continue to move well at the right price, and the oceanside neighborhood of Georgica is making a comeback after a few quiet years.
Georgica was popular in the ‘60s and ‘70s, and now we’re seeing those buyers from 50 years ago sell their homes. The houses, largely tear-downs (although no one ever wants to hear it) on nice-sized and well-landscaped lots in a great location, are perfect for new builds.
The Internet has changed local commerce dramatically
This pattern is more widespread than just Hamptons real estate, but it seems especially apparent in our small towns.
Full-time residents especially notice the steady decline of year-round shops in the villages. In addition to the unfortunate optics of empty storefronts, it also means fewer year-round jobs. Part of this is due to increased rent, but mostly it’s thanks to the ubiquitous brown packages arriving every day from Amazon and the like. I have to say: The UPS guys sure look tired.
Plus, there’s Airbnb and VRBO directly impacting the rental market, which in turn gives homeowners who rely on rental income a whole different and not necessarily welcomed landlord experience.
We have yet to see the effect of Uber and The Spur, a soon-to-open co-working space in Southampton. But compared to Airbnb and Amazon how disruptive could they be?
A local disaster brought people together
In a tribute to how passionate leadership can unify a community, when the Sag Harbor movie cinema burned down after it was listed for sale, it was purchased, and its rebuilding has become a multimillion-dollar community project.
Under the aegis of the exceptionally awesome board of the Sag Harbor Partnership, funds were raised, largely from private donations, for the purchase and construction of a brand-new cultural center with the cinema as the centerpiece.
In 2019, I look forward to seeing the theater come together, and the community continue to rally around it.
© 2018 Diane Saatchi