REAL ESTATE
The South Fork's Feeling the Pain
By Kate Maier
(Nov. 4, 2008) With more gloomy results on record for the third quarter of 2008, a downturn in the South Fork real estate industry has become more apparent. A report prepared by Judi Desiderio, the chief operating officer at Town and Country Real Estate, said that sales volume between Westhampton and Montauk had plummeted by almost 68 percent compared to the third quarter last year.
In the same two time periods, the median house sale price dropped from just over $1.1 million to $850,000. According to Ms. Desiderio, in the third quarter of 2007, 472 houses were sold in her coverage area, compared to only 179 this year.
While East Hampton and its neighbors have been described as somewhat impervious to the mortgage crisis that has rocked the country, the recent chaos on Wall Street seems to have set a more pessimistic tone among brokers, sellers, and buyers.
"We weren't so affected by the subprime situation initially, and you're still not seeing foreclosures in the Hamptons," said Rick Hoffman, the regional senior vice president for the Corcoran Group. But in recent weeks, "in the financial world, people are not seeing the income they've seen. We've seen several people who were in the market as buyers who have pulled back" as a direct result of happenings on Wall Street.
"After Black Monday, literally, people gasped," Ms.Desiderio said, "and there were dozens of deals out, some set to contract, some set to close . . . they just put the brakes on, as if the world might end."
Other buyers went back to renegotiate their contacts. More than 70 percent ultimately did go into contract, she said, but "I've heard of one or two people who've actually walked away from their down payment."
On the other hand, Paul Brennan, the regional director for Prudential Douglas Elliman, said that he was surprised that, "as much of a bloodbath as this is, I don't see it."
"Percentagewise," he said, "it's much better than I anticipated. I thought given the whole fiasco on Wall Street there would be higher casualties."
"Generally speaking," he said, "things have continued to go fairly smoothly," although he acknowledged that "there have been some [deals] that have stopped."
One client walked away from his deposit and went on to buy something more modestly priced. "There are a few isolated incidents, but not as much as I thought," Mr. Brennan said. "Most of the deals that have transacted have gone through," he said.
Stuart Epstein, a principal at Devlin McNiff on East Hampton's Main Street, said a typical seasonal slowdown was being compounded by the uncertainty about the presidential election. Combined with the national financial crisis, he said, all these factors have contributed to "a very slow market."
"Inevitably," Mr. Epstein said, "there will be times when the market moves slower rather than faster. Often these recessions last no longer than four or five quarters, so we might very well enjoy a lively market in 2009."
A bright spot, Mr. Epstein said, was that "we've had more rental inquiries at this time of year," as potential buyers scale down their spending, at least for the time being.
Of Wall Street executives in particular, he said, "they're gun shy at this point, and those are a big part of our market. Right now it's survival mode."
"We've had a huge demand lately already on next year's rentals and year-round rentals," Ms. Desiderio concurred. Even if they decided to hold off on buying, "the people in the city really have come to find their place. East Hampton is cheaper than therapy."
"Look, the world is not coming to an end, let's get that off the table right now," she said. "Equating it to the Great Depression is not going to help anyone -- 25 percent of the people in America are not unemployed right now."
But development isn't booming the way it once was, either. In the five towns of East Hampton, Southampton, Riverhead, Southold, and Shelter Island, vacant residential land isn't being snapped up by developers as quickly as it used to be, according to George Simpson, who owns Suffolk Research Service, a real estate data company based in Hampton Bays.
Despite a 10-percent drop in the median price from the 2007 third quarter to this year's third quarter, Mr. Simpson said, land sales dropped from $143 million to $74 million between those periods.
Mr. Simpson compiles his own quarterly reports. They vary slightly from Ms. Desiderio's because he includes the towns of Riverhead and Southold, and because he does not break down hamlets within the towns.
According to Mr. Simpson, the median house price in the towns of East Hampton, Southampton, Shelter Island, Southold, and Riverhead dropped to $612,000 compared to the same quarter last year, when it was $717,000. The number of units sold dropped from 701 to 468.
"Of course it's affected it," he said of the drop in the Dow. "It doesn't show up in the numbers yet, but it certainly affects it. I think we're in bad times, real-estate-wise. In the third quarter of 2000, median price was $280,000. It peaked at $825,000 in 2007."
In East Hampton Town, Mr. Simpson said, overall dollar sales dropped over 56 percent, while the median price dropped 17.5 percent, dipping from $1.17 million to $964,999. Overall sales declined from $293 million to $128 million, and the number of houses sold, from 154 to 84.
Ms. Desiderio's statistics said that in the East Hampton region, including Wainscott and Springs, third-quarter house sales dropped from 82 last year to 37. The median sale price dropped from over $1.1 million to $850,000.
In East Hampton Village, where 4 houses were sold compared to 17 last year, the median price dropped by over 30 percent, from $2,867,375 to $1,962,500.
In the Southampton area (including North Sea, but not Southampton Village), Ms. Desiderio reported that 17 houses were sold, 5 of which were under $500,000, and 7 of which were between $500,000 and $999,000. The median house sale price there dipped from $900,250 to $675,000.
In Southampton Village, only 7 houses were sold this past quarter, compared to 31 last year. The median sale price there did go up to $2 million, however, compared to $1.75 million last year.
"Right now the big thing that's going on is we have cash buyers who are looking to get bargains, in all different price ranges," Ms. Desiderio said.
"Right now you're getting some of the best deals in 10 years. You can actually buy something now -- for local people, too, there's some great deals," she said.
Ms. Desiderio said that now would be a good time for investors to buy vacant land. For homeowners, she suggested: "If you don't have to sell, take it off the market."
"If you need to sell," she said, "consider dropping 10 to 20 percent."
After the stock market crisis in 1990, ultra-wealthy homeowners who had bought "on margin" -- that is, had borrowed against securities whose value then went on to collapse -- "people had to bail," Ms. Desiderio said.
"They learned the hard way last time, don't buy on margin, and that's why I think we're not seeing a dump now. Over the last 10 years, the majority of the sales were cash."