$1 Million Cabin in the Hamptons, Anyone? How Real Estate Prices Get Inflated
If you’ve ever worked with a Realtor to buy a home, you may be familiar with the conventional wisdom to purchase the “least expensive home in the most expensive area you can afford.”
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But what if the least expensive house is a two-bedroom, one-bath cabin — going for nearly $1 million? That’s how overinflated real estate values are in the Hamptons, the exclusive region on Long Island’s East End.
Yet, despite the massive demand that’s driving prices sky high, the Hamptons is showing a larger luxury home inventory than many other hot spots, such as Palm Beach, Florida, Bloomberg reports. Hamptons home inventory for the luxury sector is up 49.9% since this time last year, Jonathan Miller, president and CEO of home appraiser Miller Samuel Inc., told Bloomberg. Palm Beach, on the other hand, showed a 59.4% drop in the luxury sector.
With this in mind, you may not expect Hamptons homes to be as costly as they are, with the median sales price at $1.3 million — 20% higher than the median sales price in Manhattan, according to a report from Douglas Elliman and Miller Samuel.
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But just because inventory is not quite as scarce as it is in other affluent suburbs, that doesn’t mean home listings are plentiful. In fact, Bloomberg reports that Hamptons Realtors are “pleading” for people to sell. That is also driving up prices, as Long Islanders who are nearing retirement age want to get as much as they possibly can for their luxury home, while Manhattanites now able to work remotely continue to flee the city in favor of Hamptons homes.
High rent costs, especially in coveted areas, combined with record low interest rates for mortgages, are also driving home prices. Many people can purchase a home for less than they could rent, especially in the luxury sector.
Plus, other factors besides supply and demand can drive housing prices. For one, the high cost and scarcity of lumber is driving up prices for new construction. Popular Mechanics reported that lumber prices have risen by 130% from pre-pandemic prices, driving up the price of new construction by approximately $24,000 per single family home, according to data released by the National Association of Home Builders.
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As developers run out of material due to increased lumber demand, this creates scarcity in the new home market. And in places like the Hamptons, a lack of available land to build new construction is also making new homes even more valuable, driving up prices.
If you’re planning to buy now, be prepared to make multiple offers on many homes before finally winning a bid. And if you’re selling, aim high. It will put you in a better position to win the bid for your next house.
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This article originally appeared on GOBankingRates.com: $1 Million Cabin in the Hamptons, Anyone? How Real Estate Prices Get Inflated