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Jan 20, 2009 9:50 AMPublication: The East Hampton Press & The Southampton Press

Year-end real estate stats show 2008 losses

Jan 20, 2009 9:50 AM

A year ago, as the national housing market stalled and sales plummeted from coast to coast, the East End’s famously insulated real estate market started showing signs of a leak. According to a report issued by Suffolk Research Service Inc. on Wednesday, January 14, things only got worse in 2008.

East End real estate took a significant hit over the course of the year, and by the end of December the number of homes sold throughout the region—consisting of East Hampton, Southampton, Riverhead, Southold and Shelter Island towns—had dropped more than 31 percent compared to the previous year. The total amount spent on real estate sales dropped more than 36 percent.

The fourth quarter alone saw 34 percent fewer homes sold than in the fourth quarter of 2007, and 46 percent fewer dollars spent.

“Well, there’s some good news: At least there’s activity,” Paul Brennan, a vice president at Prudential Douglas Elliman Real Estate in Bridgehampton, joked recently. “Obviously, sales are down in every sector, across the board. No one, in any price range, is not feeling the pinch here.”

In Southampton Town, the number of single-family homes sold was down more than 33 percent from 2007 to 2008, and dollar sales, or the amount of money spent to purchase single-family homes, was down by an equal amount. The town posted a 42-percent drop in sales and a 51-percent loss in dollars spent in the fourth quarter, as compared to the fourth quarter of 2007, according to the Suffolk Research report.

In East Hampton Town, sales were down nearly 40 percent for the year and dollars spent were down 46 percent. Comparing fourth quarter to fourth quarter, East Hampton’s market suffered a nearly 32-percent loss in sales volume and 47-percent loss in the amount of money spent purchasing single-family homes.

“The real litmus test, I think, will be the numbers for first quarter of 2009,” Mr. Brennan said. “That’ll tell us what’s in the pipeline for the year to come.”

Sales prices fell, too, but not quite as precipitously. In Southampton Town, the median price of a home fell 13.5 percent to just under $800,000, still above the $762,000 median price posted in 2006. The median price is the price at which there are an equal number of homes sold at higher and lower prices.

In East Hampton, the median price dipped below $1 million, falling 9.5 percent to $995,000. Throughout the rest of the East End, prices fell by percentages in the single digits, except in Shelter Island, where the median price actually rose by 1.3 percent to $962,500.

The median price for the region slipped 12.6 percent from $740,000 to $650,000. The latest figure is much closer to the 2006 median, which was $660,000.

Suffolk Research Service Inc. is a real estate software and research company based in Hampton Bays.

“The median price is holding up well compared to unit sales and dollar sales,” said George Simpson, president of Suffolk Research. And traditionally, median price has been a measure of a market’s success, reflecting the usually increasing value of East End real estate. But in today’s economy, the number of home being sold and the amount of money being spent on real estate are better indicators of the health of the market.

Why are so few homes being bought and sold? “What we’re seeing is like the old Mexican standoff,” Mr. Brennan said. Buyers are expecting, and holding out for, significantly reduced prices, and sellers either have the luxury of holding on to their properties and riding out the downturn or they’re unwilling to accept that home values have decreased, he said.

“The only way that people get hurt in a market like the one that’s out there now is in the event of death, divorce or debt. If you have to sell in a down market, you’re going to get hurt,” Mr. Brennan explained. “Thus far, there haven’t been that many people who have had to sell. And that’s always been the case out here. People just hold on to their properties.”

But given what’s gone on in terms of the national economy, and on Wall Street in particular, which has long had ties to the East End economy, that may start to change, Mr. Brennan said.

A good deal of second-home owners and summer home renters in the Hamptons work in finance and banking. With the demise of financial powerhouses like Lehman Brothers and cutbacks throughout the industry, those people will likely have less to spend and might well need to liquidate some assets.

“Now, if a seller wants or needs to sell, they’re going to have to lower their expectations about what their property is worth,” Mr. Brennan said. “If everyone is suffering some kind of financial problem, if everyone’s 401K is off, if everything everywhere is losing value, then Hamptons real estate is not going to escape that trend. How can the value of your house, even in the Hamptons, stay the same while all of that is going on?”

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Just the start of a 3 to 5 year downturn
By Lefty46 (56), Westhampton on Jan 16, 09 5:14 PM
Tax assessor - are you reading?
Let's see what happens to valuations come tax time.
By North of Highway (280), Westhampton Beach on Jan 18, 09 4:00 PM
There is more to come as there are no growth metrics at this point. Its a white collar recession and it will affect everyone, from landscapers to homeowners and every service trade out here as we all make our living off of residential real estate one way or another. Including people who do not work any more as Town services are cut due to budget constraints from lack of real estate revenues. As far as assessed values, they may go down but the town has a budget, so they will increase the mill rate ...more
By North Sea Citizen (528), North Sea on Jan 22, 09 7:07 AM
Oh wait... five years ago every realtor was shouting "buy now or be priced out forever." "Hamptons real estate never goes down." "There is a new pricing paradigm." "Now is the best time to buy real estate." Can a realtor finally be quoted in one of these articles as saying "We were wrong about the market then and we have no basis for knowing about the market in the future."
By HEJIRANYC (32), Sag Harbor on Jan 22, 09 1:17 PM
They're still saying that it's a "great time to buy." Not the sharpest knives in the drawer...
By LM (35), riverhead on Jan 30, 09 1:33 PM