You are currently browsing the category archive for the ‘smart money’ category.

We are seeing more “positive” real estate reports published these days. As a matter of fact, the most positive reports since the crash of 2008.

The last quarter of 2012 was a big quarter for property owners who were tax averse or had a great sum of wealth tied up in their property or both. The looming threat of the 2103 increase in capital gains, was too much to bear for some.  A number of sellers dropped their asking price by millions to avoid paying additional taxes (perhaps in the thousands) to the government. The reality is, many of those sellers were finally motivated to price their homes at market value after years of wishing, wanting, hoping for the price they would’ve, could’ve, should’ve taken in 2007.

Buyers have been waiting patiently on the sidelines for sellers to get real with offering prices. It seems that the threat of increased taxes, only trumped by death, was just the elixir that brought motivation home to roost for many. Quite clever, that Uncle Sam.

Image

So, while Manhattan and The Hamptons are seeing record sales, many other parts of the nation are seeing increased sales as well. California, Arizona and Florida have seen increased values and numbers of sales, but coming back from a 50%, 60% or even 70% drop in value was inevitable. Even as my friend, Alison Rogers, writes in Time Business about Home Prices “Jumping”, it’s not happening in every market.

Jonathan Miller posts about the Pre-Covery (a term shouted out by my other friend Phil Faranda, one of the sharpest tools in the shed ). Read the Jonathan Miller post and the Robert Schiller NYTimes piece for more insight.

The way I see it, business has maintained a pretty healthy level of activity as we have arrived into 2013 and I believe it is going to be a good year for many in the market, but for different reasons. We are still left with three basic groups in today’s real estate economy; The Good or the “Haves”, The Bad or the “Holder-On-ers” and the Ugly – the “Have-Not’s”.

.

Image

The Good (Haves) may have lost some of their net worth during the last 5 years, but still have plenty of assets at their disposal. They know that many property values are down to 2004/2005 levels and the cost of borrowing money at historic low levels. The Good know now is a good time to invest. While many sellers have been resilient, holding on to their 2007 asking prices, the Good have been even more resilient. They walk through homes, take notes, ask about length of time on the market and price history (or more often tell the agent about them based upon their online research). If the price is out of line, they don’t bother to make an offer, unless its a one-of-a-kind, gotta-have property that has particular appeal to them.  They don’t need a recovery.

The other sub-set of Haves are the young, responsible up-and-comers who were too busy either finishing school or getting their career started during the fat-and-happy days. They didn’t get caught up in the Irrational Exuberance.  They watched home prices escalate rapidly in the ’00’s thinking they may never be able to buy a home and are now delighted to buy their first home from a bank or a motivated seller at prices they saw 8 years ago.

.

Image

The Bad  (Holder-On-Ers) are just holding on for dear life. They were either able to move laterally in their career or are still there, watching company blogs and listening for the next round of layoffs…kind of like my older buddies waited for their number to be called in the ’69-’72 draft.  Many of them resisted using their homes as an ATM during The Roaring ’00’s and are able to pay their bills and get by. Some were hoping for retirement or an easier pace of life by now, but the depletion of their investment accounts and loss of value in their homes has made that unattainable. Maybe they would like to move, but can’t afford to sell their house, buy a new one and the jobs that were once plentiful are now scarce.  Left wondering why the stock market is back up to 2007 highs and their investment accounts and property values are not, they feel stuck, waiting for something to get either better or worse. They are hoping for a recovery.

.

Image

The Ugly (Have Nots) have lost the life they once new, only a few short years ago. They not only over refinanced on their home (or homes) at the peak of the market, but they lost their ability to pay for it when the job market crashed or their company went out of business. Some of them were making $200k a year as a sales rep for just showing up and now can’t get hired for $75k, even though they learned to tap dance to Yankee Doodle Dandy. Many of them saw their credit lines shut down, their credit card interest rates double or triple and they are drowning in a sea of lack. Not a fun place to be. Others are making decisions for them right now. Maybe they were granted a loan modification and since then, have failed to keep up with new payments. They’re either just waiting for the bank to take their home or it already has and now they are renting. Dazed and confused about how the last 4-5 years could have happened.  They are praying for a recovery (and filling out their Peace Corps application).

One thing is for sure: the economy is getting better –  incrementally - for SOME , but not for all.  Fortunately for us, the Hamptons has more of the Good…and Wall Street bonuses are unfolding….and spring rental and sales season is here…and the snow is melting…and life could be much worse.

Sag Harbor

“Guys on Wall Street would sell the Hamptons house and their art collection before they would take their kids out of a top school,” says one Morgan Stanley banker. “Education is an essential.” The top end of the art market has recovered quickly from the recession, so selling now might not be a bad move.

NYTimes WEEKEND INVESTORFEBRUARY 18, 2012
Honey, They Shrunk My Bonus

Follow The Bread Crumb Trail As Deflated Wall Street Bonuses

Funny thing is, I see business picking up in the Hamptons ( albeit, from a horrendous Q4 2011) and am hearing about an uptick in NYC sales too.

So what’s the truth here?  Unfortunately, with no dependable date sharing and tracking system in The Hamptons, we can’t know…stay tuned!

Gregg Saunders, vice president of retail real estate development at Philips International, had been in no rush to sell a house north of Route 27 in Sagaponack that was built for him and his wife in 1998. The four-bedroom property with a tennis court and pool had been on the market for two years at $2.9 million.

Then last year, he bought a historic home on an acre of land closer to the beach in the same town for $2.45 million.

Saunders said he “didn’t want to be stuck with two homes,” so he cut the price on the first house “dramatically.” It sold in December for $1.75 million.

as told to Bloomberg News, Jan26, 2012

The reality is, the realty market in Manhattan has held significantly better than The Hamptons.  We have typically said that “as goes New York, so goes the East End”, however it does not appear to be holding true this time around.

 

Hamptons Home Prices Fall 13% as Buyers Seek Cheaper Deals

January 27, 2012, 8:14 AM EST, Bloomberg

Why would that be?  Could it be:

1- Manhattan has more permanent residences and The Hamptons are more discretionary homes?

2- There are more foreign buyers in Manhattan than The Hamptons because the investment quality of Manhattan real estate is more stable?

3- The Bankers who have fueled both buying here as well as the business of others who end up buying here are being more conservative? ( have you heard the stories about the senior management at Goldman, Chase, etc telling their ranks to “keep a low profile”)

4- Is it that The Hamptons don’t have professional property management companies that can manage real estate investments adequately for investors?

5- When enough properties sell for 60% (or less) of asking price, does that spook big buyers to downsize and play it safe?

6- Could the lack of dependable Market Data make today’s more educated buyers uneasy?

Maybe The Hamptons are set to rebound in 2012. We’ll find out 3-4 months after the fact…

Just spoke to Mortgage Banker, Gregory Frank from Blackstone Mortgage Corp. on LI.

He says the Jumbo market is freeing up nicely with Stated Income Loans up to $3Mil in the 4% range.

“Jumbo money is awesome right now”, say Frank.

It’s available for primary or secondary homes, not investment homes.

You have to put more money down than in the past, like 30-50% today, but where there was nothing, there is now “plenty”.

 

Here’s an article from the WSJ:

Jumbo-Mortgage Market Thaws WSJ.com

Smaller and regional lenders are issuing more jumbo loans and doing more refinancings—as are some big banks that never stopped making them.

 

One of the things that keeps values down in Springs is the high taxes and now they are getting thumped again…they just can’t win.

Shouldn’t the Board of Ed try to figure out how to level the taxes between the districts that share the same resources?

 

A Surprise Tax Increase For Springs
District influx of 37 high school students
By Kate Maier, The East Hampton Star

 

Springs area of E Hampton

(October 21, 2010)   The 2010-11 Springs School District tax increase has jumped from 5.1 to 9.5 percent as a result of an unanticipated influx of 37 high school students, which amounts to an additional tuition payment of more than $800,000 to the East Hampton School District.

The Springs School District’s attorneys have advised that the tax levy increase is not subject to a public vote because it is tuition related, said Christopher Kelley, the Springs School Board president, at a meeting on Monday night.  rest of story here

 

 

 

Those who can’t afford to live here or resent those who can, often write about it and they just love to pick on the Hamptons…

“But it’ not like the old days – no cash for the Hamptons bargains this year! It’s hard to manage cash flow when bonuses are paid in stock.”

see story (sic) here

Plug holes in your home

A home energy audit that uses an infrared camera can help cut your heating bills and make your home greener.

Quiet Americans
Financial Times – London,England,UK
“The auction jolted the system in the Hamptons,” he says. “You had people talking about real estate again.” But when will talking lead to buying in earnest

A Time to Grieve: Assessments Up, Despite Market
The Sag Harbor Express – Sag Harbor,New York,USA
Deyermond contends the town must comply with state law, which dictates that properties be assessed based on the real estate market conditions as of July 1,

Dreier’s homes hit auction block
Crain’s New York Business – New York,NY,USA
The disgraced lawyer’s properties in the Hamptons and in midtown are slated to be sold by David R. Maltz & Co. next month. Three residential properties

Surge in Underwater Mortgages Forces Obama Administration to
Money Morning – USA
About 90 homes began the foreclosure process in the towns of East Hampton and Southampton in the first 10 weeks of 2009, according to the Real Estate Report

Rental Market Finally Picks Up
East Hampton Star – NY, USA
Agents are reportedly working hard for their money, hauling potential renters around and haggling with landlords, many of whom refuse to budge on prices already discounted in anticipation of a rough rental season…

County Exec signs off on Boys and Girls Harbor purchase
27east.com – Southampton,NY,USA
According to Deputy County Executive Chris Kent, the contract has been forwarded to the county’s real estate office, which will in turn deliver the contract

Openings: Surf Lodge, Fishbar, c/o The Maidenstone
Newsday – Long Island,NY,USA
Summer is right around the corner and notices of impending restaurant and club openings in the Hamptons and Montauk are trickling in.

Sunday Real Estate Round-Up, 05/03/09
Luxist – Santa Monica,CA,USA
–via the NY Post, ghree of disgraced lawyer Marc Dreier’s Hamptons homes are about to hit the market. –Lisa Bonder Kerkorian, the ex-wife of billionaire

Jim Cramer

Jim Cramer

I don’t know how many of you watch Cramer on CNBC. I usually flip through when he’s on and watch as much as I can handle, and I do get the feed from Blogging Stocks. The thing I appreciate about Cramer is he speaks his mind and gut. Sometimes he’s right, sometimes he’s not (right Jon Stewart?)

This time, I hope he’s right…

“And why not? Prices have come down gigantically. Mortgages are the cheapest in our lifetimes. There’s a new tax credit for first-time homebuyers. You combine all of these and you get two things: 1) It is dramatically cheaper to buy than to rent — by as much as $4,000 a month, and 2) You have to be an idiot not to think about buying a property right now.

Still, nobody believes. I hear such non-refutational nonsense around the clock. People email me, telling me that I have no idea what I am talking about with the “coming bottom” in real estate. Here’s the staples; you have probably heard of a lot of them by now:”

see the entire post here

Certainly not here, in the Hamptons!!!!

Again, we can’t help but take everything we hear about national trends, here in the fabulous Humptons, with a grain of salt ( make that Kosher or rock salt – the grains are bigger and more robust).  After all, we are “the playground of the rish and famous”, but what a difference 6 months make, right Bernie M?

But, while we are no Las Vegas, NV or Naples, FL or Bakersfield, CA where overbuilt condos or subdivisions have resulted in prices falling 50% or better, we are certainly seeing our fair share of the drop in values. Properties that ARE selling right now, appear to be selling for between 25-45% below what we percieved to be “peak” values at the end of 2006.  Unfortunately, we have such undependable and inconsistent record keeping, it’s hard to tell. And, without an MLS or any kind of market-wide public data, all data we get is homegrown and a minumum of 3-4 months behind – not very helpful in these erratic times.

That being said, After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade by Steve Bergsman , may offer some valuable insight that might even be applicable to us here on the East End.

Looking ahead, two residential sectors Bergsman expects to underperform the market include: condominiums (especially those in popular vacation areas such as Las Vegas or South Florida) and, at least until the next decade, second homes.

However, due to future demographic trends pointing to an aging population, smaller families and a growing preference for returning to the city centers, condos located in urban areas that haven’t been overbuilt could return to health as early as 2010, he said.

inman

Goodbye, McMansions

Book review: ‘After the Fall’

Inman News

Blog Stats

  • 480,346 hits
Follow

Get every new post delivered to your Inbox.