Hamptons home prices fall 9% as most of LI sees smaller dip in Q2

When the pandemic fueled a boom in Long Island real estate, prices increased faster in the Hamptons than the rest of Long Island. Now that rising interest rates have cooled the market, the Hamptons is seeing a larger pullback.

The median price among Hamptons homes that sold in the second quarter was $1.45 million, or 9.4% lower than it was during the April-to-June period a year ago, according to a new report released Thursday by real estate brokerage Douglas Elliman and appraisal firm Miller Samuel.

Across Long Island, excluding the East End, the median sale went for $600,000 in the second quarter, which was down 0.8% from $605,000 a year ago.

While prices are lower in some areas compared with last year, the pullback hasn’t erased the gains made since the pandemic started and led to a surge in demand for Long Island homes.

The median price for Long Island, excluding the East End, has increased 34.8% since the second quarter of 2019. The median in the Hamptons rose 70.6% during those four years.

“We saw during the pandemic a much higher trajectory of prices in the Hamptons than we did on [the rest of] Long Island,” said Jonathan Miller, CEO of Miller Samuel. “ … There’s more distortion in the [Hamptons] market because it’s a smaller market with less transactions and more volatility because of the extremes of the pricing.”

A greater drop in the number of sales at the high end of the market also contributed to the decline in the Hamptons, Miller said. 

The North Fork was the outlier, with the median price rising 8.3% to $980,000 on 101 sales during the quarter.

Fewer buyers are striking deals than a year ago. Sales were down 23% on the Island, excluding the East End, during the quarter. In the Hamptons, the number of deals dropped 41.3% year-over-year to 259. That’s a slight improvement from the first quarter when deal volume out East was at a 14-year low.

A shortage of listings has pushed down the volume of sales, Miller said.

“Sales were skewed unsustainably high by mortgage rates being rock-bottom during the pandemic,” Miller said. “ … It’s hard to have transactions when you don’t have things to sell.”

While prices are no longer rising steeply, agents said they haven’t noticed much of a difference in the competitiveness of the market because there are so few options on the market for buyers.

Among closings in the second quarter, 46.3% sold for above asking price on Long Island, excluding the East End. The Island had recorded a record percentage of houses selling above their list price last year during the second quarter, at 59.2%. 

“Some people are being priced out of the market because of interest rates,” said Angela Prince, who leads a team of agents at Weichert Realtors in Bay Shore. “But there’s still so many buyers and no inventory that you’re still having the bidding wars as well.”

There are still plenty of buyers to support a strong market in the Hamptons, said Philip O’Connell, executive managing director of Brown Harris Stevens in the Hamptons. The number of sales just hasn’t stayed at the torrid pace of 2020 and 2021.

“Those years were an absolute anomaly, and we’re returning to some normalcy,” he said.

The leveling off in home prices has coincided with the Fed's campaign to raise its benchmark interest rate to slow down the pace of inflation. That has made it more expensive to borrow money to buy or renovate a home.

On Wednesday, the Federal Reserve increased its benchmark rate for the 11th time since March 2022 to a range of 5.25% to 5.5%, which is its highest level in 22 years.

O’Connell thinks buyers are in better position now than if a change in Fed policy makes it cheaper to borrow money.

“Once the Fed stops raising rates, the sentiment will change in the market, and there will be a ton more buyers competing for the limited inventory,” he said. 

The Hamptons market benefits from a large swath of cash buyers, but rising rates in the past year have made buyers who need a mortgage more price-sensitive, said Tim Kelly, a real estate broker and manager of Douglas Elliman’s Sag Harbor and Montauk offices.

The average rate for a 30-year fixed mortgage was 6.51% during the second quarter, according to Freddie Mac. During the same period a year ago, the rate averaged 5.27%. Last week, the average rate was 6.78%.

“There’s not that big an incentive to get out of your current house,” Kelly said. “There’s not a lot of options because there’s no inventory, and if you reset your mortgage [with a higher rate], your cost of living in the property will go up.”

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.