Real Estate Moves At A Dizzying Pace.
Prior to 2020, the Hamptons market was steady, but it wasn’t exactly setting the world on fire. One could easily find deals, patience was key, and all data points pointed to a Buyers advantage. Wait and see, and general indifference, was the prevailing attitude to buying a home.
Then things changed in an instant. Warnings of the luxury housing market potentially on life support dominated Real Estate headlines in March and April 2020. As things began to open up in June and July though, quite the opposite occurred on the East End.
A Historic Time for Real Estate
As it turns out, a pandemic is bad for practically all economic sectors, except for Real Estate, especially high-end property acquisitions.
Changing priorities, work-from-home mandates, and urban exodus propelled housing across the country into one of the most frenzied Seller’s markets on record.
Fueled by historically low-interest rates, even lower inventory, and extraordinarily high demand, the market wasn’t just hot, it was feverish (no pun intended).
Although that torrid buying spree has cooled off to some degree - mainly because of a pure lack of inventory, low mortgage rates and continuing Buyer interest has pushed the fervent Seller’s market into a second year.
Granted, it’s not the same frenetic market we saw in prior months, but opportunities remain for Sellers to capitalize on intent and motivated Buyers. And when shopping for a home, those willing to move quickly and cleanly are almost always the ones to track down favorable properties at almost any price range.
As we head toward the end of 2021, let’s explore both aspects of the property transaction and how to sell and buy in an extremely challenging market.
Looking back over the first two decades of the 21st century, there’s never been a better time to be a Seller than now. One could extend that statement even further back in time. That’s how rewarding the market has been to those listing a home over the past 15 months.
Of course, nothing lasts forever. The market will ultimately balance itself with increasing supply and interest rates more in line with historical standards. Signs already point to an eventual return to pre-pandemic normalcy sooner rather than later.
That said, Sellers still control the market, holding the proverbial keys to the kingdom, even as they temper expectations for a highly lucrative transaction.
Be Realistic with Pricing
To that last point, gone are the frantic sight-unseen purchases at any price of mid- and late-2020 and early 2021. Aided by interest rates hovering at the unheard-of number of 2.5%, Buyers barely blinked an eye at even the most overpriced of homes.
Buyer’s remorse has set in for those overly enthusiastic house hunters (which is leading to an uptick in inventory in some places). The current crop of shoppers, while still motivated to buy, are much savvier with what they’re willing to pay for a property.
As a result, a Seller with sky-high expectations would do well to keep pricing realistic. You want your listing price to draw on a broader pool of qualified Buyers versus attempting to hit a home run with a deep-pocketed investor on your listing’s first day.
Buyers are focusing on listings that reflect a sound understanding of where the market currently stands. More so now than earlier in the pandemic, deal seekers are eschewing homes that appear priced to take advantage of desperate Buyers.
In other words, not only can Buyers now clearly spot gouging, they’re looking to avoid it.
Pricing your home at or near market value — even a bit under — will nevertheless result in multiple bids and a lofty sales price, particularly those properties in excellent condition and a standout location.
It’s also worth noting that if you get what you ask for, take it. Although bidding wars can drive your asking price higher, it has the potential to backfire, on multiple levels.
The longer the transaction stretches on or the more complicated negotiations become, the greater chance the sale will fall through. It’s not worth the 2-3% increase in selling price if you end up having to relist the home.
Demand for Quality Inventory
In regard to property conditions, this is where demand is exceptionally high in the luxury segment. As we will touch on a bit later, Buyers are exercising more patience in today’s climate. They know that with limited inventory, they’re not going to find a home that has everything they desire.
Instead, they’re waiting for the right home with just enough checked boxes from their wish list to go all-in to secure the deal. The catch? The house they target must be at or near excellent move-in condition.
Playing out across the ultraluxe market, Buyers are seeking genuine turnkey properties. If they’re going to pay above-market prices in the latter half of a brisk market, they expect above-market accommodations.
Much of the shift is attributable to less emotional or panic-driven buying. As we highlighted earlier, a number of early pandemic Buyers are remorseful over the purchases they made.
Today, those in the market for a new house are taking a far more measured approach. And they’re a lot more discerning about the homes they make an offer on.
For your listing to stand out, it requires putting in the necessary effort to prepare it for the market. Certainly, there’s the standard prepping and staging to get the home ready to list, but consider upgrading the more dated areas of your home. Along with increasing its value, you’ll raise the home’s attractiveness to scrutinizing buyers.
Indeed, in this market, the greater the effort, the greater the reward. And the data reflects quality properties, appropriately priced, will sell quickly and with favorable terms.
We’ve already touched on several key aspects of how buying habits have evolved throughout the last six quarters. Calculated and deliberate have replaced the impulse purchases prevalent up until just a few months ago.
After observing what’s transpired over the past year, it’s critical that Buyers enter the market with a healthy dose of realism. Yes, the market is shifting toward a more balanced state of affairs, but that shift is moving at a snail’s pace. If you need or want a house now, prepare to adjust your expectations.
Inventory Remains Painfully Low
Perhaps more than any other market driver, the dearth of viable homes for sale has forced Buyers to reevaluate their standards and what they truly hope to gain from buying a home now.
Foremost, realize that when buying property in a Seller’s market, you’re not necessarily going to find a home that ticks off every single want and need from your checklist.
Let’s be honest, rarely does that happen in a market that favors Sellers. Operating in an environment where Sellers hold almost every advantage means it takes roughly 18 to 24 months to locate and secure the “perfect” property. That time frame may vary depending on how much cash you have to offer a seller.
You don’t have to lower your standards, per se, but it will help your home search and reduce your blood pressure if those standards are adjusted.
Seek out available homes that possess at least some of your “absolutes.” If you get three or more, that’s a winner. Oversized master suite, chef’s kitchen, outdoor entertaining areas: this is all standard fare in the Hamptons, so it shouldn’t be difficult to find homes with at least a few highly desirable features.
More importantly, look for a high-quality home that’s been well maintained. Even if it comes to pass that you ultimately part ways with the house at a later date, the better shape the property, the greater the chance you have for flipping it into your own lucrative sale.
Negotiability Is Limited, Time Even More So
Frustrating as it may be, there is still very little negotiability when transacting Luxury Real Estate. Demand remains high, and though you can take a calculated approach to identify homes on which to place an offer, don’t procrastinate once you’re locked in.
The market may no longer be as competitive as several months ago, but top homes — well priced, great location, turnkey — are often under contract within a week of their listing going live. In many cases, they barely last a day.
Ultimately, hesitation is your worst enemy if you’re in the market to buy and buy now. It’s not uncommon for Buyers, even high-end luxury Buyers, to submit a number of offers on a number of homes before having one accepted.
If you expect to charge to the front of the line, ensure your financing is airtight and come to the table with your best competitive offer. If you have cash, even better. That’s true for any market, Buyer or Seller, hot or not.
Are you ready to explore the best of Hamptons real estate? Contact Christopher Covert and the Covert at Compass team today to start your home selling or buying journey.