Slowdown Zaps Open Space Fund

Higher-end house sales bigger drag on market

The East End real estate market is experiencing the biggest slowdown since the 2008 financial crisis, according to the latest quarterly report from the Douglas Elliman agency. The decline in sales led to a more than 29-percent decline in revenues for the Peconic Bay Region Community Preservation Fund, Assemblyman Fred W. Thiele Jr. announced on Friday. 

According to the Douglas Elliman report, the number of home sales in the first quarter of 2019 was down more than 19 percent from the same period in 2018. It was the fifth consecutive quarter of declining sales. 

In August 2018, the agency had found that sales of luxury homes, defined as those priced at $5 million and up, were robust, while sales of lower-priced homes lagged.

Now, according to the report, the declining sales of higher-end homes has become the bigger drag on the market. The sales of homes priced at or above $5 million were “well below the quarterly average for the decade,” and sales of those at or above $10 million hit a six-year low. 

The Corcoran Group reported a decline in both overall sales and prices. There was a 2-percent drop in sales of luxury homes, the report said, and lower prices in that sector resulted in a 15-percent decline in sales volume, nearly $70 million less than in 2018. The Town and Country agency reported a 41-percent drop in sales of homes priced between $3.5 million and $4.99 million. 

Mr. Thiele referenced the downturn in his announcement about the C.P.F. revenues, which were at a seven-year low. The fund receives the proceeds from a 2-percent real estate transfer tax imposed by the five East End towns: East Hampton, Southampton, Shelter Island, Southold, and Riverhead.

“Sales activity has declined, particularly at the high end of the market,” Mr. Thiele said. “Local government officials should closely monitor C.P.F. revenues in the coming months and be cautious in making any long-term projections.”

Southampton posted the largest decline in C.P.F. revenue this quarter, raising just over $8 million, compared to nearly $14 million in 2018. Revenue from sales in East Hampton was down by almost 14 percent. Riverhead was the only town in which the tax revenue increased, by more than 9 percent. Shelter Island’s C.P.F. revenues were down nearly 38 percent, and Southold’s by almost 19 percent.

The Douglas Elliman report cited recent volatility in the financial markets, and the new federal tax law, particularly the cap it places on exemptions for property taxes and other state and local levies, as the key factors impacting the market.   

Andrew Stern, a managing partner at York Bridge Wealth Partners, a financial planning and investment firm in New York and Bridgehampton, said an increasing sense of economic uncertainty might also be the underlying cause. “The real estate market is a proxy for how people feel emotionally about the future of the economy, and people are reticent about where we are in the economic cycle,” he said.

Even though mortgage rates are at historically low levels, and the latest economic reports have been positive, “people are being more mindful of being overextended financially,” he said. “That may be a signal that an economic downturn is coming.”