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Fewer McMansions on the Horizon By June Fletcher, WSJ
Builders Have Little Incentive to Create More McMansions and Hardly Anyone is Buying. There are Deals Out There, But You Better Act Fast.
Real-estate mogul Steven Roth has bought Bernard Madoff’s beach house in Montauk, N.Y., for $9.41 million, nearly 6% more than its asking price.
Hamptons Luxury Homes: One of Country`s First Builders to Become Carbon Neutral
Dalene is the co-founder of the Hamptons Green Alliance (www.hamptonsgreenalliance.org) and the developer of a unique methodology, The International Carbon …
The North Haven property belonging to the advertising executive who did the Michael Jackson Pepsi …
Hamptons real estate is suddenly sunnier
Crain’s New York Business
Home sales in the Hamptons—Long Island’s beach oasis for the rich and famous—are making a comeback. Sales rose 32% during the third quarter from the same …
As predicted, the 3rd quarter number of foreclosure filings (Lis Pendens) on Long Island has already surpassed the record set in the 2nd quarter with 8% of the filing periods still unrecorded.
A six-bedroom spec home on 1.5 acres at 493 Parsonage Lane in Sagaponack is still on the market, but builder Joe Farrell said he rented it for $600,000 for the summer.
Speculative building is a risky endeavor almost anywhere. From the initial land purchase to the process of obtaining permits, hiring an architect and overseeing construction, building a home before you have a buyer is not for the faint of heart. In tony spots, like the East End of Long Island, where the price of land has gone up seven-fold in the past 10 years, it can be an even bigger risk.
And a year after the subprime mortgage crisis, it can be downright dangerous.
“I can’t imagine why anyone would go into speculative building right now,” said Walter Molony of the National Association of Realtors.
Nationwide, building is down. Though spec building isn’t broken out from the stats, new housing starts dipped 27 percent from 2007, which was itself a drop of 24 percent from 2006.
However, Michael Davis, a longtime developer of high-end properties in the Hamptons, argued that, “the Hamptons is unique.” Davis, who has already sold one spec home in Southampton this year for $5.9 million, has two others in the works. “If you’re in the right location in the Hamptons,” he said, “demand exceeds supply, even now.”
Still, market watchers are aware that even the Hamptons have not been completely immune to the fluctuations of the national market. In Southampton, for example, the number of new dwelling permits issued so far this year is just over a third of what it was in 2005. Between January and June 2008, the town handed out 62 permits — down from 88 last year, 130 in 2006, and 175 in 2005.
According to Michael Daly, a broker with RE/MAX Beach Properties who also blogs about Hamptons real estate, a select group of developers and builders (including Michael Davis) have been betting on the Hamptons market for decades — and though they may be adjusting their expectations, they certainly aren’t packing it in. Instead, said Daly, some speculative builders have begun marketing their new homes pre-construction, thereby reducing the, well, speculation.
“More and more builders are putting out their products with sophisticated renderings and floorplans, seeking to gauge the level of interest before they start building,” Daly said.
He estimates that there are about one-third fewer “new construction” homes currently on the market in the Hamptons than there were last year. Of those approximately 135 homes, Daly said that about one-third are being offered “pre-construction.” He said that pool of inventory includes 60 percent of the homes on the market with asking prices above $10 million and 42 percent of the homes currently listed between $2 million and $5 million.
In Bridgehampton, for example, one 6,000-square-foot oceanfront property is listed for $22.9 million “total turnkey,” or alternatively for $15.9 million “as is with plans and permits.” In Quogue, a 9,600-square-foot bayfront property with a wine cellar, gym and tennis court on 4.1 acres is being offered pre-construction for $15.5 million.
“Builders are trying to mitigate a bit of their exposure,” said Daly, who points to 35 homes in the area that have been built but not sold.
Bernard Markstein, senior economist and director of forecasting for the National Association of Home Builders, said “mom-and-pop speculators, the people who got in during the housing boom, have largely shaken out or are licking their wounds trying to figure out what to do with their property. The long-term players, on the other hand, are simply trying not to overextend themselves.”
Custom homebuilder Joe Farrell is one of those long-term players. Farrell, who Daly called “one of the most successful builders in the Hamptons,” said he’s sold eight speculative homes in various stages of pre-construction, at prices ranging from $2.1 million to $18 million, in the last six months.
“One house [is] sitting a little longer than usual, but we ended up renting it for $600,000 for the summer,” Farrell said.
Still, he does admit to being a bit more cautious in the new market. “I’m only buying land if I can get a great deal,” said Farrell.
For his part, Davis said that about one-third of his current business is speculative construction and that the volume of spec homes he’s working on hasn’t changed much in the past year.
“Last year when subprime hit, it sounded as if the real estate market as a whole was going down the tubes,” said Davis. “But I think it’s unfortunate that the press tends to generalize.”
Don Sharkey, the chief building inspector for the town of East Hampton, said building permits overall are “definitely down about 10 percent.” But, he notes, they don’t have data isolating new construction.
Meanwhile, Don Louchheim, the mayor of the Village of Sagaponack, told The Real Deal that the village is currently considering four subdivision proposals, representing about 100 acres total.
The right location, said agents and builders, is key, as are views.
Jeffrey Colle, who has been building and restoring high-end homes in the Hamptons for 30 years, said he is “absolutely as busy” as he was two years ago.
Colle is currently at work on a $40 million spec home in East Hampton, on which he is sparing no expense — from 18th-century fireplaces to bathtubs carved in Italy. The 12,000-square-foot home on Georgica Pond abuts a meadow reserve and will boast an infinity pool, six bedrooms, seven fireplaces and “sunsets that’ll knock your eyes out,” he said.
Colle said he’s already had brokers from Sotheby’s come by, as well as potential buyers from as far away as California and Australia. “I’ve been out here 30 years, and I’ve never seen the top of the market go down,” said Colle.
And that’s good news for other high-end developers like Robert Gianos, who has spent several years preparing to construct a Southampton subdivision that some have dubbed “Billionaire’s Corner.” Nothing like your typical suburban tract home, Gianos’ Olde Towne is reportedly inspired by the look of the village from when it was originally settled in the 1640s. Lots are reportedly priced at between $18 and $22 million.
“He’s building for untouchables,” said Daly, who reasons that since Gianos’ potential buyer won’t care what the price of gas is, the developer needn’t fret over market fluctuations either.
Lunch With … Michael Daly
For the last decade, Michael Daly has been one of the top real estate brokers on the East End.
In 1998, he started True North Realty Associates to offer what he calls straightforward, no-nonsense service. Now, Mr. Daly does business as Beach Properties of the Hamptons, having opened the first of three offices in Southampton in 2006. Though focused on Hamptons real estate, the North Haven resident has contacts with other Realtors in Manhattan, across the tri-state area, and in coastal Florida, the Caribbean, Costa Rica and 65 countries around the globe.
He also operates the Hamptons Real Estate Blog, which is dedicated to the Hamptons real estate market.
Mr. Daly recently talked about the real estate market, his blog, and a few other things, over lunch at Silver’s restaurant on Main Street in Southampton Village.
How did you come to know the Hamptons? Did you grow up here?
I’m from the city, but I’ve been a summer kid out here since 1960. My family had a summer cottage in Westhampton where all the kids and moms would come out. I’d leave school as soon as it let out and stay the entire summer. I was one of the luckiest kids in my school.
Since coming out here as a kid, have you noticed over the years that the Hamptons have become more of a year-round community and not just a seasonal community?
Oh, absolutely. I still remember “Tumbleweed Tuesday,” which is what we used to call the Tuesday after Labor Day, because it was said you could see the tumbleweeds blowing down the main streets in the Hamptons because everyone was gone. So much is changing. I think one factor is that with telecommunications as they are today, people have more flexibility with work, which allows more people to stay out here year round.
So, tell me a little about your real estate blog.
Well, I started it in November 2006, and I’ve had more than 62,000 hits. For me, it just became a way of communicating. I looked and saw a lot of blogs coming up, and I didn’t see anything about Hamptons real estate. I’ve had visitors from all over the world. But mostly it’s a way to express myself and to pass on to colleagues and clients what I think is important about Hamptons real estate. And also to be a resource for where to stay or where to go and eat.
Do you enjoy it?
I have fun sometimes, but other times it’s a labor of love. Often, it depends on my time. I’ve tried very hard not to make it a gossip blog, because I think we already have enough of those. And I think gossip can be destructive. So I’ve tried to keep it informative and about real estate.
Well, speaking of, there’s been a lot of talk about the slowing down of the housing market. What, if anything, have you noticed?
Well, I definitely see a change in the market just from the stats alone. The market was down some 40 percent for single-family homes in the first quarter, and a recent report for single-family homes after April indicate they are down 30 percent. That’s for the townships of East Hampton and Southampton, which in my view comprise the Hamptons. But this is definitely the biggest downturn that I’ve seen.
Is there any particular dropoff ?point where you’ve noticed homes going down the most, or staying the same?
I don’t have the exact numbers, except the 30-percent drop in the number of sales. But I think the biggest hit has been on sales between $3 million and $5 million. However, the average sale price is up over $2 million. But that’s due, in part, because we’re still having quite a number of big sales—$10 million, $15 million, $20 million, $25 million sales—and a lesser number of $5 million-and-under sales. So when those smaller sales drop, these bigger ones bring up the average.
When you get up into those high figures—$20 million, $25 million sales—are those people pretty much immune to what’s going on in the market?
I think so. I think that echelon is immune to everything—gas prices, food prices, as well as real estate prices.
Do you see the market picking up again anytime soon?
Well, I’m bullish on the real estate market. I think there are some really terrific values out there right now. I think it’s coming to the point where people are not going to be able to resist getting back in because of the quality of the deals that are available.
So there’s an upside to the slowing market?
Yes. Traditionally, values in the Hamptons don’t drop. They’ll stay flat for a period of time.
Speaking of affordability, I wanted to ask you about affordable housing. As you know, this is a huge issue in town, how to keep much needed middle-income workers in town when the cost of real estate out here is so high. As a Realtor, how do you see affordable housing playing into the real estate market?
I like what’s happening with the whole topic of affordable housing. It’s evolving into workforce housing. I think affordable housing has gotten a bad rap. Especially by “NIMBYism.”
Not in my backyard”?
Yes. Because it often gets attached with the idea of bad neighborhoods, or people who really can’t afford to live there being given handouts, and that sort of thing. But that’s not what the issue is here. It’s about creating an environment for the people who work here to be able to live here, which creates a healthier balance.
I think the community is coming closer to finding answers. I think one of the most practical solutions is to allow for accessory apartments, both commercial and residential mixed use, allowing for some of the office spaces in the villages to be turned into apartments. Sag Harbor, for instance, has a pretty nice balance of commercial spaces downstairs and apartments upstairs.
I think there are a lot of available spaces that could be converted into rental units. And that also helps other people to afford to stay in their homes because that can supplement their mortgage or serve as additional income. Because it’s a real bummer for people who work here to have to commute from far away and sit in traffic. The trade parade as they call it. And if we don’t solve affordable housing, you end up with a community of “haves and have-nots.”
What do you think more affordable housing units would do to the real estate market in general? From a real estate perspective, do you think it would lessen the values of homes in the area?
No, I don’t think it would. I think that’s a knee-jerk reaction—that if you put something up that’s “affordable housing” next to me then my property is going to lose value. If done properly, I think it would actually enhance values. I mean, if you can’t find needed workers, or live in a community where teachers, cops, nurses, assistants can’t afford to live, then, in the end, you’re only hurting your own property values. We need to find a balance.
Have you noticed anything in particular with vacant land sales?
A: It’s interesting. It used to be that land was just land. You’d buy a lot and build a house. But, over the last 10 years, land has become a huge commodity. And there’s less of it. For example, the Community Preservation Fund has greatly reduced the amount of land available to purchase.
Are you a fan of the Community Preservation Fund?
If there’s less land available, does that at all cut into potential sales that Realtors can represent?
No, because preserving land increases the value of the land that is available. It drives values. And, the thing is, we live here too. I live on a 50-acre reserve. I don’t want to see this place paved over.
You know, I resented for a long ?time the notion held by some that ?Realtors are all just money hungry and want to just sell everything. I fought hard to build a relationship between Corcoran and the Peconic Land Trust. We all want to maintain the beauty and the value of where we live. We have more commonalities than we have differences.
I’ve always liked the idea of “doing well by doing good.” Doing good things brings good karma and brings success. I sit on the board of HANFRA, which is the Hamptons North Fork Realtors Association, and we recently gave a Leadership in Conservation Award to Timothy Caufield, the vice president of the Peconic Land Trust, for his efforts to maintain the face of the East End through preservation. They’re a wonderful organization.
What do you enjoy most about real estate?
Well, besides truly enjoying the “art of the deal,” my passion is in working with new and experienced agents in developing their businesses. I teach agents about the four “C’s”: Confidence, Commitment, Contacts, and Closing Skills. I’ve worked with agents who have all the four C’s, but it’s taken them a year or more to make money. Nothing, nothing, nothing, then, boom! It all kicks in and they do fine. That’s a beautiful thing to see and very rewarding.
According to our fav real estate gossip guy, Braden Keil of the NYPost, North Haven recently experienced a bidding war on a waterfront property. Check it out:
Warner Music Group chairman Lyor Cohen is spending $6.8 million for a teardown in the Hamptons. Sources say Cohen has just closed on the property in North Haven after a bidding war erupted for the bayfront home, which was listed at $5.5 million.
“Lyor was actually the second-highest bidder,” says a source, “but the guy with the highest offer couldn’t come up with the $7.2 million – and he also lost his $720,000 deposit.”
While the four-bedroom Contemporary is nothing to crow about, the stunning 2.5-acre property has 170 feet of waterfront. Meanwhile, Cohen has taken his Bridgehampton estate with a $9.5 million price tag off the market in anticipation of his lengthy construction project.
see the article here
Jonathan Miller has put together the market report for the East End.
Read the complete report here
It’s very exciting news that the Sag Harbor Village Boards are, one by one, approving the plans that have been put forth by Cape Advisors for the Bulova Residential Plan. It’s been said that the project will take 5 years, and the economic rewards to the village will last for at least 100 years.
For more info, also goto: www.savesagharbor.com/
Presumably, that will give an indication as to how many foreclosures might be in these community’s future? Looks like the East End has a much lower overall percentage than our sister markets to the west. see map here
Ok everybody, here we go again with the MEDIAN price figure.
Raise your hands: How many of you REALLY know what MEDIAN price means and CAN EXPLAIN IT!?!? Median is like a Metric figure to me. Like: “What, you want me to walk two kilometers?” or, “WOW! that was a matter of centimeters!!!” Sorry, it’s pretty meaningless to me…for a definition of “median”,try this
Would it make it any better or worse to know that the AVERAGE price of Hamptons Real Estate is now over $1.6 Million? Impressed? Depressed?
for more info: http://www.suffolkresearch.com/quarterlycharts.htm
I moved to Sag Harbor nearly 10 years ago from Remsenberg, a tiny halmet just west of Westhampton. That was after living in New York, Santa Barbara, San Jose, Del Mar and Hingham, Mass.
Sag was – and still is- a number of things that I like in a community; family oriented, casual, shops mostly locally owned and operated, boating all around and quite unassuming. Sag has been known as the “Un-Hampton” for many years…until recently when housing prices have shot up dramatically and those seeking a more relaxed, integrated village lifestyle have been selling their “south of the highway” homes and moving to the Sag Harbor/North Haven area in droves.
Then in the last year, a number of condominimum projects have been proposed for “the harbor”, all of which I am in favor of, for they will not only provide a balanced choice of lifestyles in our community, but each of them will replace blight in our village. The Watchcase Factory, The Diner Building and Roccos nightclub.
But THIS CVS THING HAS GONE TOO FAR. I am not in favor of CVS coming to our community at all, never mind opening a 17000 square foot store that belongs next to the Home Depot Expo in Smithtown. Granted , they are probably shooting for the moon, asking for way more size than they know they will be allowed, but geez…THIS IS RIDICULOUS!
Sag Harbor is the only village on the East End that still has a 5&10cent store. Let’s keep this last one open!!!
Check out the NYTimes article below and if you want to participate, go to the links after to sign the petition. md
[tags]Beach properties, Hamptons, sag harbor, watchcase factory, CVS, cape advisors, save sag harbor, diner building, water street condos[/tags]
Just as you come over the Sag Harbor bridge in North Haven is Christie Brinkley’s newest house, sitting beautifully on the harbor. see MODEL HOME by Braden Keil, New York Post.