In many ways we are still at the dawn of real estate analysis in the Hamptons. Although there has been an explosion of data-driven analysis in other fields over the last decade or so, that has not been the case in our real estate market.
It’s rare that a property such as this one comes along. The reason: we have transfer data for five separate transactions, going back to the late 1980s. It’s very instructive to take a look at that data.
This house is located on Parsonage Lane in Sagaponack, which is one of the central East/West corridors running between Town Line and Sagg Main Street, south of the highway.
The house is on 1.1 acres, and the first recorded transfer we have is in 1987, when it sold for $185,000. At that time, there was a different house on the lot, which was later torn down. At that time, my mother was a real estate agent based in East Hampton. She was assigned Sagaponack by her brokerage as her “territory” because my sister rode horses there and no one was much interested in buying or selling the few awkward and isolated houses in the middle of the almost unbroken potato fields.
The amount of money $185,000 represented in 1987 is worth about $350,000 now, which in theory would be the price today if there had been no appreciation. More than 20 years ago, 1987 was a scary time in real estate out here; the S&P dropped about 25 percent that year.
But after a few years, the dot-com revolution brought big gains in the market, which was much higher in 1997 when this property sold for $560,000. That transaction reaped the 1987 buyer a big return of almost 11 percent per year.
The 1997 buyer, in turn, sold in 2000 for $1,050,000. That comes to more than 23 percent return per year!
The 2000 buyer sold to the present seller, in 2006, for $2,950,000. That sale represents a massive return of more than 18 percent per year.
The present seller, who paid almost $3 million for this lot, built a gorgeous house on it in 2008. The house is large—almost 8,000 square feet—but a perfect gambrel-style traditional, with six bedrooms and 7½ baths and all the bells and whistles one would expect, including the latest technology and a gunite pool.
It’s always hard to know whether a builder of a new house has made money, as costs vary widely. But it’s amazing that we can see from this property that an ordinary acre in Sagaponack increased over 19 years, from 1987 to 2006, by almost 16 percent per year.
27east on Feb 20, 2012