Lack Of Supply Constrains Listings And Sales, Fueling Record Median Prices
From a real estate perspective, Montauk is very interesting: while considered a part of the Hamptons, it really operates as its own micro market with pricing and supply concerns and variables that differ from the rest of the Hamptons market. While much of the rest of the Hamptons has seen demand for property fueled by the COVID-19 pandemic and the corresponding flight from NYC, Montauk remains a bit in its own bubble. Distance from the city is a factor, as is the general beachy-town vibe that Montauk has managed to maintain in spite of ongoing residential development. Notwithstanding the subtle market differences between Montauk and the rest of the Hamptons, housing supply in Montauk was eaten away by two years of record and near-record activity, as Long Islanders and wealthy New Yorkers sought more spacious, isolated properties or just accelerated home buying plans in response to the pandemic and low interest rates.
Now the lack of supply is constraining listings and sales. The Hamptons – including Montauk – is seen as separate from the rest of Long Island because it serves as second-home communities for many Long Islanders and New York City residents. “The pandemic era is characterized not by a decline in inventory but a collapse in inventory,” states Jonathan Miller of Miller Samuel in his market report prepared for Douglas Elliman. “The collapse has been caused by insatiable demand and a structural change in the way the Hamptons is perceived: it’s a co-primary market now instead of a luxury, second home market.”
The idea that Montauk is now a “co-primary market” is being proven by the latest market data. By the beginning of June of this year, listing inventory in Montauk increased to 24 properties representing a 9.1% increase over first quarter availability with an average time on the market of 118 days. As reported by Judi Desiderio, CEO of Town & Country Real Estate in her Hamptons Q1 report, the median home price in Montauk reached a new high: $2,000,000. However, inventory did not change in the one bedroom, two bedroom, four bedroom or five bedroom listings; volume only increased for three bedroom properties. Only two listings were sold above asking price; at least three listings were sold at a discount.
Rising interest rates, the specter of stagflation and a fear factor centered around national and global events is now beginning to have an impact on the Montauk real estate market. As inflation eats away at down payment funds while rising interest rates impact a buyer’s ability to finance, properties are beginning to sit a bit longer on the market, with 200 days or more not being uncommon. These properties are subject to larger discounts and require brokers to be a bit cagey, removing listings and re-listing to create the illusion of “new”, with some pricing adjustments. However, there is some good news: for investment property buyers who remain in the market for the next ten years or more, the cost of borrowing money should remain cheaper than inflation making Montauk and the rest of the Hamptons a solid investment play. Additionally, the Hamptons remains one of the few markets in the United States where you can rent your home and very often be cash flow positive.
For Montauk homeowners thinking about selling, it’s important to make sure that your property pricing and positioning is exactly right for the Montauk environs and marketplace – or you could risk sitting on the market for a while and having your listing become “stale”. That being said, a beautiful and hot summer could make for a robust and active fall market, as those who are secure in Hamptons rental properties and future sellers decide to transact this fall. Only time will tell…