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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.
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”.
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.
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.
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.
The recent Superstorm Sandy caused much damage in it’s path; both physical and psychological.
We, on Eastern Long Island, while losing some homes in Wainscott and Quogue, along with some of our most beloved dunes in Sagaponack and Bridgehampton, were fortunate to not be in Sandy’s direct path. Seeing the heart-wrenching interviews with families to the south and west of us who lost everything was sobering and made me embarrassed to have spent one minute belly-aching about the tree that fell on my car and broke off the passenger-side mirror and the few days that I spent without electricity.
( Mario Tama / Getty Images / October 30, 2012 )
The impact to New York City, which includes Manhattan, Brooklyn Queens and oft-forgotten Staten Island was too close to what those mega-disatster movies on NatGeo have been showing for the last several years…how did they know? Why didn’t we do anything to defend ourselves against this? Should we re-build?
( Andrew Burton / Getty Images / October 29, 2012 )
With schools, businesses, public transportation and electricity for hundreds of thousands shut down for a week, the economic impact is tremendous…and will be tallied for some time to come.
And if Sandy wasn’t enough, while recovery is underway, the current gas shortage in the Northeast and the approaching Nor’easter set to arrive this week are like a 1-2-3 punch. No wonder so many are walking around like zombies and much non-essential business and travel are on hold.
(AP Photo/Seth Wenig)
Aside from making some tough choices about rebuilding for individuals, politicians in cities, states and the Fed will need to make tough choices about infrastructure spending (ala Holland) in the days ahead. From what I hear, some Europeans are looking at what happened as unnecessary and a result of our short sighted political myopia that leaves us reacting to the disasters we know will happen, rather than planning to prevent them.
Building safety codes will be strengthened, making home and building construction more expensive and insurance companies will react to this event with no mercy, cancelling policies and raising premiums to pay for the outlay they will have from this storm and to mitigate future losses. Global warming advocates will say “I told you so” and will push their agenda to limit the burning of fossil fuels use of chemicals harmful to our environment even more vigorously.
What will be interesting will be to see the shift in the real estate market. After 9/11/01, there was a large migration to the suburbs from Manhattan. Shaken and terrorized, thousands moved to what they considered to be less vulnerable areas. What are considered safer areas after Sandy? Higher ground? Interior homes? Newer construction? Will generators become as common place as the flat-screen TV?
Time will tell, but the draw of the sea is powerful and our memories are short. For every homeowner that leaves their waterfront home, there are several willing to take their place, which is why oceanfront, bay front and harbor front homes sell at such a premium. Let’s all agree to take steps to make them safer and to use good judgement during serious storms. They’re not worth losing our lives for.
Michael Daly photo
“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.
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.
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?
I suppose we’ve been spoiled.
“Oh,$25million was the highest sale last year? Too bad.” Well, while most of us would love to have those $25m, $24 and even the $16M sales, seeing them at the top of the carts, compared to the $100M Further Lane and $65M Gin Lane sales of 06-07 make us ponder if this low-carb life style is here to stay?
We shall see, wont we?
…to be continued.
“…home automation features are increasingly being built into smaller spec homes and new developments. Buyers like the convenience as well as the energy savings. Alfonso Giaquinto, the owner of Plum Builders, said he decided last year that “complete home automation systems” would be among the amenities that his spec homes offered. “The technology was available at a good price,” Mr. Giaquinto said, citing research showing that the 39- to 49-year-olds he was appealing to were “interested in having this technology in their home.””
IN THE REGION | LONG ISLAND
By MARCELLE S. FISCHLER
Published: January 5, 2012, The New York Times
“Compared to the third quarter of 2010, home sales in the Hamptons and North Fork jumped 14.7 percent, to 538 from 469, and the median price rose 12 percent, to $700,000 from $625,000”
East End market gains over last year
Third quarter marks second highest number of $5M-plus sales in four years
October 27, 2011 12:00AM
By Leigh Kamping-Carder, The Real Deal Magazine
Just for the record, I have an issue with flowery articles that put a positive spin on data reports that show slight gains after a catastrophic downturn. And to top it off, because there is no single source for home sales on the East End ( because the brokers are still refusing to employ an MLS system in order to keep out competition) every report has different data and is interpreted differently. The report below shows a decline in Q3 2011 vs Q3 2010…who’s right?
Yes, sales are increasing in some areas and in the higher price ranges, but there are still thousands of homeowners who are under water, stuck in their homes, unable to sell and don’t know where to turn or what to do.
Any improvement is good, but let’s be realistic about where we’ve been and where we are.
Here’s a table of 3rd Quarter sales on the East End from 2007 to 2011.
This is a market where every other resident has their real estate license (in hopes of fortune and fame) and many of people we know bought multiple properties in the “Roaring 00’s
when the number of sales are down nearly 40% from 2007 and the sales volume is down nearly one-half billion dollars, that’s not great news.
|East End 3Q 2011||454||573,840,437||607,250|
|East End 3Q 2010||549||627,850,081||602,999|
|East End 3Q 2009||535||652,774,790||590,000|
|East End 3Q 2008||517||601,573,787||575,000|
|East End 3Q 2007||725||1,051,874,697||732,000|
It comes down to business levels and greed. Flat out, the owners would rather have their shops empty than rent them for a price year round tenants are willing to pay.
There is a moral component to that, and not being a landlord, perhaps I can’t appreciate that situation. But being a resident and a Realtor, I can appreciate that fact that it is depressing to see empty stores on our Main Street.
Here’s an article from the NYTimes, which only skims the surface:
Charles DiSapio, the owner of Country Gear, a home furnishings store in Bridgehampton, said if he had not bought the building where he opened the business in 1982, he would not have been able to keep up with rising rents.
“I couldn’t afford to be here,” he said. “I’ve seen a lot of stores go out of business because they didn’t own their building.”
By MARYANN HAGGERTY
Published: April 28, 2011
IT might be easier if you just paid cash for that vacation house.
There is loan money available for second-home purchases, but expect bigger down payments, higher interest rates and other standards tighter than on a principal residence — and those standards are tight already. In addition, there are quirks specific to vacation markets.
Vacation-home purchases accounted for 10 percent of home sales last year, according to a National Association of Realtors survey released this spring. Investment purchases accounted for 17 percent — but sometimes the line between the two is a bit blurry. That’s down sharply from the height of the real estate boom in 2005, when vacation and investment sales accounted for 40 percent combined.
Rest of article here