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Real estate in the Hamptons had its worst spring in 8 years

CNBC logo CNBC 7/25/2019 Robert Frank
a close up of a hillside next to a body of water: Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017. © Provided by CNBC LLC Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017.

It's been a cruel summer for Hamptons real estate

Real estate sales and prices in the Hamptons continued to fall in the second quarter, marking a year and a half of declines, according to a report from Douglas Elliman and Miller Samuel. It was the worst second quarter for sales in eight years.

The weakness in the Hamptons is especially surprising given the strength of the stock market. For decades, Hamptons real estate rose and fell with the stock market since so many of the buyers worked in finance and Wall Street. But despite the S&P 500 being up 20% so this year, the Hamptons is suffering from some of the same pressures as other high-end markets – an oversupply of luxury homes, a lack of foreign buyers, changes to the tax law that have hit high-tax states hardest and sellers who are still clinging to 2014 prices.

a kitchen with a sink and a window: Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017. © Provided by CNBC LLC Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017.

The worst may still be yet to come. The number of homes listed in the Hamptons nearly doubled in the quarter, to more than 2,500. This is the highest level since Miller Samuel started collecting data in 2006.

There is now a 15-month supply of listings. The glut is especially large at the high end – with more than a three-year supply of luxury properties, according to the report.

"I think it's premature to talk about a turnaround until the inventory growth slows down," said Jonathan Miller, CEO of Miller Samuel, the appraisal firm. "There is just not a sense of urgency. The buyers are just waiting it out."

a bedroom with a large bed sitting in a room: Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017. © Provided by CNBC LLC Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017.

Brokers say that there is demand, but only at reasonable prices. And many sellers aren't budging.

"You might look at Zillow and see nine properties on the oceanfront in Southampton, which looks like a lot," said Cody Vichinsky, of Bespoke Real Estate in the Hamptons. "But then you dig into it and you see that six of them are in places where you'd never want to live, with constant helicopter noise or a triple dune or encumbrances. And then the others, the price is ridiculous. When a property is priced decently, it goes."

Vichinsky said that he expects the market will pick up in the third and fourth quarter, given recent activity. He said he's working on three deals above $20 million, and that some of the wealthy are taking money out of the stock market before the election year to put money into real estate.

a living room filled with furniture and a large window: Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017. © Provided by CNBC LLC Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017.

"They know the market slows as people wait for the elections and they see real estate as a buyer's market so they're jumping in," he said.

But bargains in the Hamptons are still relative. The average sale price in the Hamptons fell 2.5%, but is still over $1.7 million.

a large lawn in front of a house: Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017. © Provided by CNBC LLC Dick Cavett's estate in Montauk is listed at $33.95 million, down from $62 million in 2017.
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