Considering the tax law changes, would-be investors are going back and forth about the most advantageous place for their discretionary dollars…the stock market or a second home purchase in a vacation town. The winner? Investors are going with the stock market.
Home sales have dropped for the third straight quarter in Long Island vacation towns to the tune of -13% from the year earlier in the three months through September 2018, according to Miller Samuel Appraisal Services and Douglas Elli man Real Estate. Transactions tumbled -22% for homes priced at $1M and above, the biggest decline in sales volume in three years.
The new federal tax laws with its $10,000 limits on state and local taxes and its cap on mortgage deductions at $750,000 are making real estate purchases more expensive. Tack on rising mortgage interest rates to those limits and caps and the stock market appears to promise better returns.
Lia Comras, overseer of sales in the Hamptons for Brown, Harris, Stevens, said, “People have their money in the stock market, it’s liquid, they’re doing well, so, it makes sense to maybe leave your money there for a while.
Despite fewer sales in the Hamptons, Q3 2018 median prices increased +15% to $1.034M, according to Brown, Harris, Stevens. Buyers of lower-cost homes are “…more price-sensitive plus (those buyers) are certainly more dependent on mortgages,” said Carl Benincase, a vice president with Douglas Elliman who oversees home sales in the Hamptons.
Luxury sellers with properties priced in the top 10% of the market saw Q3 2018 as a good time to list their homes. Inventory of those luxury properties at the end of September this year increased +40% compared to the same time last year and a record number of luxury homes for sale compared to the end of 2011.
Big-ticket purchases offset declines in total transactions in Montauk and Southampton. Montauk home sales decreased by -25% compared to a year ago while the median price of those sales transactions jumped +28% to $1.24M, according to the Corcoran Group. Southampton sales transactions decreased by -4% and median sale prices increased +18% to $835,000, again according to the Corcoran Group.