According to a recent report by Douglas Elliman Real Estate, high taxes are stifling sales in Long Island, an enclave of the Hamptons. Homes priced at $5M+ during Q3 2019 saw the fewest number of sales in six and a half years although exact statistics defining “the fewest number of sales” are not included in Elliman’s report.
Why “high taxes” as the chief culprit? In December 2017 and effective in 2018, tax reform effectively eliminated state and local tax deductions, aka SALT deductions, for high-income earners by rendering previously unlimited deductions to a summary cap of $10,000. Such disallowed deductions have essentially raised the cost of living and owning properties in states such as New York, New Jersey, Connecticut and California.
The wider luxury market (defined as the top 10% of the market, according to Elliman) in the Hamptons saw sales drop -14.6% as compared to Q3 2018. Transactions across the overall Hamptons market at all price points dropped -15.2%.
As a consequence of such lagging sales, home inventory in the Hamptons soared. At the high end of the market, inventory increased a startling +143.4%. Inventory in the Hamptons’ overall market bounced up to +76.9%.
Todd Bourgard, Elliman’s senior executive regional manager of sales for the Hamptons, said, “Right now in the Hamptons, it’s all about pricing – at every level. Smart sellers are starting to understand that if they price a property properly, it will sell faster. As a result, we are extremely busy right now, and seeing a dramatic leap in multiple buyers on a single property, presenting full price offers or even above. Concurrently, both buyers and sellers are getting results at a fair market value.”
The willingness of sellers to negotiate on property prices has gone up from 10.5% in Q3 2018 to 12.3% in Q3 2019. Such increased willingness to negotiate on price and the sharp drop in mortgage rates are appearing to help offset negative effects of SALT and mansion tax implications.
The result? The median sales price in the Hamptons rose +5.5% to $857,000. On the luxury side of the market, prices have dropped -11.1% to $6M in Q3 2019.