(NEW YORK, NY) —— The real estate rut has traveled east. The picture-perfect Hamptons, which has provided an oasis to many wealthy New Yorkers, is losing value.
According to Douglas Elliman Real Estate, home sales in the Hamptons have fallen 19.3 percent in the first quarter, and this has been the fifth consecutive quarter of falling numbers. The median sales price of a single-family home has fallen 7.9 percent to $860,000 between January and March of 2019, compared to the same period the previous year.
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Besides the suffering sales market in New York, there are several possible reasons for the slow down: Downsizing baby-boomers – this generation has shifted to downsizing. As their children are moving out and moving to lower-tax states such as Florida.
The slowing market is also due to the inability of millennials to buy second homes. Millennials are career oriented and focussing on buying their first homes and paying off mortgages before taking the leap to buy their second property.
New York financial sector has been another contributor to the distressed housing market. The average annual bonus fell 17 percent from 2017, according to the estimates by the New York State controller.
The major contributor is due to the change in tax laws. The slowdown is contributed to the Trump Era tax changes. Jonathan Miller of real estate appraiser Miller Samuel blames the cap of $10,000 on the amount of state and local taxes, as well as property taxes, that can be deducted from federal income tax.
Governor Andrew Cuomo of New York has said that Trump’s $10,000 cap is politically motivated, calling it a “diabolical political maneuver” declaring an “economic civil war” which has “restructured the economy to help red [Republican] states at the cost of blue [Democratic] states.”
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Miller also says that the tax changes impact the north-east more than the rest of the US due to the homes in the north-east market are much more expensive. “Most of the north-east is a high-cost, high-tax housing area,” says Miller.
Loyal Hampton dwellers continue to go east regardless of the current state of the market, but prospective buyers seem to be holding off. Rylan Jacka, a Hamptons agent with Sotheby’s International Realty, says, “this year, the volume of rentals has far exceeded anything I’ve done in the past 20 years.”
Sellers are lowering their expectations and accepting lower prices, becoming more realistic about the changing Hamptons market. It will take time for transactions to pick up again, as many sellers are disconnected from the current state of the market. “It could take another six months or a year for sellers to capitulate,” says Miller.