The state of the hamptons

The talking heads on CNBC’s Power Lunch are discussing how interest rates are up to their highest level since 2003. There has been so much babble about “the bubble” that all of a sudden, real estate people are looking for other things to talk about, afraid that if someone else confirms that “business is slow” they will have to face the fact that perhaps the “irrationally exuberant” days of the real estate market, where every bartender, hairdresser and “retired” stockbroker got their real estate license and made money just for passing the mirror test, may be winding down. Winding down? Well, at least quieting down a bit. Nationally? Everywhere? Even in the Hamptons? It seems that there is a feeding frenzy on bad news about real estate. During a recent real estate convention in New York, one of the senior managing directors of a top firm theorized that all this talk about ‘the bubble’ is a conspiracy by the media to reduce prices because reporters don’t get paid enough and most of them couldn’t afford to buy homes. Pretty far-fetched, but I must admit, the thought crossed my mind.

Here are a few facts, according to Long Island Profiles Publishing Company, publisher of real estate sales information in Nassau and Suffolk Counties.

The yearly number of properties sold (both homes and land purchases) in East Hampton and Southampton Townships which many consider to comprise “The Hamptons”:

Year -- # Sales - Total $ Volume - Avg $ Price -- Median (est.)
2002 -- 3641 -- $2,406,044,590 -- $ 660,820 -- $ 415,000
2003 -- 3384 -- $2,727,082,500 -- $ 805,875 -- $ 505,000
2004 -- 3942 -- $4,002,921,884 -- $1,015,454 -- $ 635,000
2005 -- 3408 -- $4,447,505,182 -- $1,305,019 -- $ 750,000

So, while the actual number of properties sold in 2005 was down nearly 16% from 2004, total dollar volume increased 11%. The average sales price was up 28% and median price increased approximately 18% (the median is the point at which half the prices are higher and half are lower). For a little perspective, the median price for real estate transactions on Long Island is $445,000 and for the US it is approximately $235,000.

Southampton and East Hampton Township quarterly results for the end of 2005 show reported number of sales during the last quarter were down nearly 25% from 2004, a fairly significant drop, considering that during the same period of time there has been an increase of about 25% in the number of licensed real estate sales associates. It’s getting to the point that if we don’t have any friends “in the business”, we probably don’t have too many friends.

So far for 2006, reports are sketchy and incomplete at best, but it appears that total number of sales reported for January and February are down slightly from a year earlier. Keep in mind that these reported figures often reflect business that took place at least 3 months earlier. Remember how long it took to close on your last property purchase or sale? My last closing happened five months after the seller and I agreed to the sales price. The property needed to be re-surveyed, then scheduled for an inspection by the building department for an update C of O (certificate of occupancy) and then one of the attorneys went on vacation. After the closing, the title company lost the paperwork and it took nearly a year to have the documents re-signed by all parties because the seller lives in Sweden. All that had to happen in order for the deed to be recorded by Suffolk County and the sale to be reported. So…this is not a perfect science.

Also keep in mind that the Hamptons is a very unique place where demand is not driven by corporate relocations and other traditional reasons for real estate purchases. This market is driven much more by emotion. How else could you explain the fact that we recorded 30 sales in 2005 over $10 million? And believe it or not, that super-premium market still remains the hottest segment on the East End. I just completed a search on HREO.com and it appears that there are nearly 100 properties listed for $10 million and above.