Picking Over the Bubble Decade
Housing reports take long view of wild ride;
tales of middle-class flight
(02/04/2010) Real estate agencies that operate on the East End have begun to release long-term market reports that put the recession-induced slump of the past 18 months into perspective, for those who might have forgotten what things were like here before the mid-decade boom. Certainly the number of sales has decreased dramatically, and times have been tumultuous. Still, houses are selling for prices exponentially higher than they did a decade ago.
In general, market figures had risen steadily year after year, even to a point where many professionals found home values overinflated. Recent dips and dives have sent the industry into a stress-driven tailspin, although most analysts agree the situation has begun, however slowly, to correct itself.
“When I used to go out and pitch listings and tell people about the market conditions in the Hamptons, I would say, if you look at a graph, it would go up and down but never like those sharp spikes that you saw on the New York Stock Exchange,” said Ray Smith, a managing partner in Prudential Douglas Elliman’s East Hampton office. “Until last year, we never had spikes like that — that was really the first spike I’ve seen in 30 years of real estate here.”
In a five-year report that looks at the market “from top to bottom,” or from the peak years of 2005-7 to what she hopes was “the bottom” this past summer, Judi Desiderio, the chief operating officer at Town and Country Real Estate, recorded 2,544 home sales in the South Fork markets she monitors in 2005, and 1,094 in 2009. Total sales came in at $3.6 billion in 2005, peaked at $3.8 billion in 2007, and have since fallen to $1.8 billion.
With fewer sales to go around, there has been a thinning of the herd among agents, a phenomenon that is ultimately beneficial and not at all surprising to seasoned brokers like Mr. Smith and Ms. Desiderio, who also has three decades of experience in the industry.
“I’d rather have 10 smart brokers doing business than have 25 looking at each other,” Mr. Smith said. Brokers who jumped into the business within the last five years “were pretty much order-takers” as an influx of big spenders looked to get into speculative building. “Now, you have to be smarter, and more informed about the inventory,” in order to make it.
“It’s a time for companies to become leaner and meaner” and perhaps question how many offices and agents they need, Ms. Desiderio said. “People do leave the business. If you check with the Department of State, you are going to find the number of [real estate] licenses has radically changed.”
As far as the recovery goes, “because of how this recent recession is affecting the entire country, I think our progress is going to take quite some time,” Ms. Desiderio said Tuesday. “By the time we get back to 2,500 home sales, it may be five or six years from now.”
While there is no argument that broader financial trends continue to influence a market that has made a tentative move toward recovery, things have changed dramatically on the East End over the course of the past 10 years, according to a report released last week by Miller Samuel, a consulting company that compiles data for Prudential Douglas Elliman.
Perhaps most notably, the median sales price in what the report calls “the Hamptons Market,” an area extending from Remsenburg to Montauk, crept from $367,000 in 2000 to $825,000 in 2009. The average price jumped 152 percent in that 10-year period, from $607,000 to $1.53 million.
After a boom in the middle of the decade, in which average sales prices peaked at $1.8 million in 2007, according to the Prudential report, prices have begun to stabilize, comparatively speaking. In Ms. Desiderio’s report, as far west as Quogue, the median price peaked at $1 million in 2007, dropping by about $90,000 in 2009.
Ms. Desiderio said that today, “prices have corrected themselves to the lowest point that we’re going to see in our lifetime.” With added incentives from the federal government, “I think that the market we’re in right now enables people that were closed out of the market before to come in.”
“The lower end of the market is very active; a lot of deals under $1 million are flying off the shelves,” Mr. Smith said. “Properties that are down to $850,000 make it palatable for a new buyer.”
Despite the enthusiasm of these brokers, the lack of affordability in the 2010 housing market is a very real problem for a big segment of the population here.
“We want to stay here because our family has lived out here for decades, but we can’t afford a house,” said Leah Boyle, a new mother who runs a restaurant in Montauk with her husband, Darren. “We even got a grant from Suffolk County for $14,000 for a down payment, but you can’t buy a house for over $380,000 — that’s the rules, they say,” she said in an e-mail message.
Ms. Boyle said many of the people she grew up with in Montauk are “moving away and finding work somewhere else, even though they make more money out here. Why work 70 hours a week and get nowhere — no savings, no health insurance, nothing to show for it. Why not move and make less money but live more comfortably?”
For Ms. Boyle, the reason is the family that she would hate to leave behind. For an indefinite time, she and her husband are renting.
Mary Mcpartland and her husband, who both work in sales, bought a house in Springs 10 years ago for $240,000. If they decide to sell, which Ms. Mcpartland sees as inevitable, they will make a profit thanks to the housing boom, “even at the reduced market rate versus where prices were three years ago,” she said.
This can be seen on a larger scale in the luxury end of the market where, according to the Prudential report, median sales prices rose steadily from $1.75 million to a peak of $5 million in 2007 and 2008. Since then, the median has declined to $4.3 million. Smart buyers who bought during the boom are still walking away with big profits in that sector. A $13.75 million sale that recently closed in Sag Harbor brought in a tidy profit for Raymond Langston III, who bought the property for $800,000 in 1997.
In a perfect world, Ms. Mcpartland would be just as happy to keep her house in Springs as Ms. Boyle would be to use that government grant to buy an “affordable” home in Montauk. With two working-class paychecks, “what’s sad is how much is still left on our mortgage,” Ms. Mcpartland said. If her family doesn’t sell their house and bank the profits, “even after the house is paid off, there is the issue of excruciatingly high taxes,” she said. “That will force a move, eventually, even with no mortgage left to pay.”