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Real Estate Center

Sep 30, 2008 11:38 AMPublication: The East Hampton Press & The Southampton Press

Financial crises felt here

Sep 30, 2008 11:38 AM

There’s one thing that most real estate agents on the East End can agree on this week, and that’s that their offices are eerily quiet, as the eyes of potential home buyers remain glued to television sets waiting for answers to the national economic crisis.

Signs that the real estate market here is far from healthy have been present since early this year, as the number of home sales plunged as much as 50 percent in January to June of this year compared the first half of 2007. The number of pre-foreclosure filings here also doubled from July 2007 through July 2008. And in an area where many Wall Street executives have second homes, there are even more reasons for concern now that the market slipped below 10,000 this week.

U.S. Representative Tim Bishop, in comments to reporters about the federal bailout program approved last week, said this week that contractors working on at least 14 multimillion-dollar homes on the East End have stopped work due to the homeowners’ uncertainty about their financial future.

For Michael Daly, the owner of the former RE/MAX Beach Properties in Southampton, the signs that the market was heading downhill came as his customers had an increasingly difficult time finding financing. Despite an optimistic start, Mr. Daly ended up closing his doors in July 1. He is now in the process of opening True North Realty Associates, an agency that will represent buyers, not sellers, in North Haven.

Mr. Daly said that his reasons for closing the agency were directly tied to the failure of major investment banks that have been hurt by the sub-prime mortgage crisis nationwide.

“The banks had been systematically shutting off lines of credit” to his customers, said Mr. Daly, who placed his nine agents with other agencies before shutting down his Southampton franchise.

“Buyers’ brokers have been around for a while,” he said, “but it’s been a seller’s market for most of the last 10 years. Now that the market has turned, buyers understand that their position has strengthened and are demanding that they have representation in real estate transactions.”

Mr. Daly said that his colleagues in the business are “certainly seeing a lot of people waiting on the sidelines” for Congress to agree to a plan to stabilize the economy. “Some of the people I’ve been talking to believe that we’re at a bottom because, although some people want to wring their hands and fret about the recovery program, there are a lot of people recognizing the fact that the government and the administration will do what’s necessary to stabilize the economy. There’s a tremendous amount of cash out there and there are some very good real estate buys, too.”

Mr. Daly said that, according to his statistics, there are currently 175 new construction homes on the market, up from around 160 at the beginning of the summer. He said that many of those houses are in Water Mill, Bridgehampton, Sagaponack and in the area north of Southampton Village.

He added that Suffolk Profiles’ three-month median price for June, July and August of this year is down to 2005 levels, while the number of home sales is on track to be 60 percent below the peak number of sales achieved in 2004.

Mr. Daly said that part of the difficulty with gauging median price is that, if more lower-priced houses are selling than before due to the economic crisis, it skews the statistics for median home price lower than the average home price would be.

“Average price hasn’t fallen that much,” he said. “Earlier this year it had increased. I don’t think that a lot of values have fallen.”

Harald Grant, an agent at Sotheby’s International Realty, said that, while he’s certainly seen a “price adjustment” in what people are asking for their homes, great locations are still drawing good prices.

“Everybody wants a discount,” he said. “But most of these people who own homes out here are intelligent businesspeople. They’re not panicking. For every misfortune, that’s someone else’s opportunity. But there hasn’t been that many misfortunes. We don’t have a lot of foreclosures, distress sales, whereas Middle America has. Our owners are a little more solvent.”

Rick Hoffman, a regional vice president at the Corcoran Group, said that his agency is responding to the buyer’s market with an advertising campaign aimed at highlighting value. Over Columbus Day weekend, the Corcoran Group will hold an open house showcase highlighting the best values on the East End, and has begun to market “value” properties on its website.

The properties are chosen from newly well-priced listings and recently reduced-price properties in all price ranges up to $10 million.

“Any time you purchase in the Hamptons, it remains a good investment,” he said. “With the market in flux and when you see Wall Street drop 700 points in one day—I’ve never seen real estate drop that much in one day. It’s an investment with a proven track record over the long term. And you can’t live in your stock portfolio.”

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