Financial Times on South of the Highway cost differential
In the view of the FT,
The equation is simple: south of the highway your property is worth 50 per cent more than north. And every 50ft you creep towards the ocean, prepare to write a disproportionately larger cheque.
Never seen those statistics before. I think they made them up.
WSJ on Swimming Pool Maintenance and Opportunity Costs
The WSJ looks at the cost of pool ownership and concludes that
"It's definitely not an investment," argues Jim Holtzman, financial planner at Legend Financial Advisors in Pittsburgh. "It's a big liability, if anything."
From a financial perspective, over the long term, they are absolutely correct. Yearly pool maintence, increased insurance costs, and opportunity costs all make a swimming pool a liability. But in the Hamptons, all these costs can be recouped by the much higher rental prices owners can command. Maybe the answer in the Hamptons from a financial perspective is don't put one in unless you are going to rent for at least a month each summer.
The most important pool-related real estate investment one can make here is buying a place with room for a pool. You can always put one in later. The risk is that zoning will change and the room for a pool will be eliminated. So get a building permit if possible. And beware of sales listings claiming there is room for a pool; many are inaccurate.
NY Post on Montauk Commercial Property
The Post runs through some of the commercial properties that are for sale in Montauk. They get some details wrong - such as the selling price of the Madoff house - but accurately convey the idea that Montauk has been "discovered" by developers (and not for the first time....). Montauk is one big wetland, so as always, and especially in Montauk, buyer beware and make sure you are working with brokers and attorneys with a real understanding of the relevant zoning laws...
Meanwhile, real-estate investor Andrew Farkas, who bought the Montauk Yacht Club, a 35-acre resort and marina, in 2006, has spent millions refurbishing it, but the town council reportedly will not allow him to deepen the harbor to allow mega yachts to come in.
"He's pissed, and has unofficially put the property on the market," said one broker. Farkas declined to comment.
Bloomberg on Market Conditions and Zoning
Today's Bloomberg Article is a very good overview of some important market issues. First, prices have fallen by about 25% so
“If you can identify the value of something in 2004, you can be pretty certain that that would be the value today,” says Michael Daly, founder of brokerage True North Realty Associates in North Haven and author of Hamptons Real Estate Blog.
In my weekly analysis for my columns I have noticed three consistent exceptions: the best land, waterfront property, and good modern homes are all scarce and have all held their value.
The article also mentions the importance of finding out whether structures pre-exist zoning, in which case they may be very valuable, or have been built illegally, in which case they have little or no value:
Even rotting docks and seawalls--vestiges of a more permissive waterfront construction era--can add to the worth of the property. In the town of Southampton, which includes Westhampton Beach, docks built from scratch can be no longer than 100 feet, while the presence of an older dock grandfathers in the potential of building a bigger one.
The whole article is worth reading.
Bridgehampton South Report – 2Q 2010
The following properties transferred in Bridgehampton South of the Highway in 2Q 2010:
40 Williams Way, $1,785,000
129 Halsey Lane, $1,500,000
449 Ocean Road, $5,200,000
11 West Pond Drive, $5,900,000
584 Pauls Lane, $2,675,000
61 Newlight Lane, $3,850,000
29 Jobs Lane, $3,310,000
265 Meadowlark Lane, $3,900,000
Average Price:$3,515,000
Median Price:$3,580,000
Notable Sales From my Weekly "Transaction Highlights" column:
449 Ocean Road, Bridgehampton (Vacant) $5,200,000
This 2-acre vacant lot is part of what was once a 26-acre parcel in Bridgehampton, south of the highway about midway between the village center and the ocean. The entire parcel was subdivided into six approximately 2-acre lots, with 13-acre reserve, and sold in 2005 for $12 million.
Seller purchased this 2-acre lot in May of 2007 at the height of the market for $3,750,000. This sale, almost exactly three years later, represents an excellent compounded annual return of over 11 percent.
This recent transaction is yet another piece of data suggesting that while homes dropped in value by approximately 30 percent during the crash, land in the most desirable areas, because of its scarcity, held or increased in value through the crash. As a pure investment vehicle, it appears in many cases that purchasing raw land is superior to buying a home.
In addition to the likelihood of appreciation, there is no maintenance and taxes are low. But land cannot be easily leveraged through the mortgage market, presents a re-zoning risk in some cases that can result in devaluation and does not offer its owner use and enjoyment while it is held.
265 Meadowlark Lane, Bridgehampton, $3,900,000
This 1-acre lot, located a block from the ocean in an excellent neighborhood, is square and flat. There is an aging, contemporary 3,000-square-foot, four-bedroom house on the property, which was built in 1982.
Under current zoning, this lot can support a 10,000-square-foot house with pool and pool house; a second story would provide a view of the ocean and Sagg Pond. The existing house is almost certain to be torn down, so this sale was essentially a land transfer. And like all land transfers, this is a critical piece of valuation information that affects all the home values in its area.
The sellers paid $3,140,000 in 2006 near the 2007 market high. Although home values have declined since 2006, this transfer is yet another example of the clear trend that high quality land, due to its scarcity, has held or increased in value through the crash. In addition, the increasing sales of land and teardowns in excellent neighborhoods indicates that the building cycle is beginning anew and buyers expect market values in the best areas to increase.
East Hampton South Report – 2Q 2010
There were 3 sales in East Hampton South in the 2nd Quarter (excluding Georgica where there were an additional 3 sales). In the first Quarter there were 13 sales in East Hampton South, and 10 in Georgica.
We will have to wait until later to see which quarter is more representative of this year’s norm. Overall, sales volume in the Hamptons was up about 20% in the 2nd Quarter compared to the 1st Quarter (and about 90% compared to the 2nd Quarter of 2009), so I don’t think the volume drop in East Hampton is meaningful.
The current quarterly reports show prices in the Hamptons rising, but this is a distortion based upon the increased level of high-end buying which has driven the average and median price calculations up over last year. Prices in the Hamptons have largely stabilized, and East Hampton South is no exception. Improved market conditions are attracting new sellers, and the financial markets are now strong enough to generate new buyers, so I expect that going forward there will be a rough balance between supply and demand and well-priced homes will sell relatively quickly.
As market conditions have improved, some notable high-end sellers in East Hampton who have been waiting patiently on the sidelines have begun to list their homes. A selection of this currently available inventory appears at the end of this report.
The following properties transferred in East Hampton South of the Highway excluding Georgica in 2Q 2010, and by coincidence each is on Skimhampton Road:
56 Skimhampton Road, $1,400,000
83 Skimhampton Road, $2,850,000
197 Skimhampton Road, $1,525,000
Average Price: $1,925,000
Median Price: $1,525,000
(Last Quarter's more representative Average Price was around $6,000,000 and Median was around $5,000,000).
Notable Inventory
20 Drew Lane. Oceanfront with pool. 7,0000 square feet, 1.7 acres. $34,995,000.
8 Hither Lane. Excellant house built by Jeff Colle, 8,500 square feet, 1.9 acres, $14,000,000.
35 Huntting Lane. Beautiful 3 story traditional. Owner motivated, just reduced to $5,600,000. Likely to Sell Soon.
Notable Sales From my Weekly "Transaction Highlights" column in the Southampton and East Hampton Press:
83 Skimhampton Road.
Seller purchased this .75-acre vacant parcel in 2005 for $830,000. The lot is square and flat, south of the highway with good proximity to East Hampton, Amagansett and the ocean.
At the height of the market, the seller began construction of a 3,200-square-foot, four bedroom farmhouse with living room, dining room, den and professional eat-in kitchen. There are many extras, including a butler’s pantry, sunroom with radiant heat brick floor, and fireplaces in the living room and master bedroom. Outside improvements include a full-size Gunite pool and detached two-car garage.
Assuming a cost of $400 per square foot—about $100 above average—plus $250,000 for pool, patio, garage, lawn and landscape, it appears that the seller managed to make a profit on this speculative build-out during the period when many others did not. Quality construction and an excellent location are always attractive. And since the crash, farmhouses have been especially popular, perhaps because their traditional design is reassuring during this period of economic uncertainty.
Amagansett Dunes Report – 2Q 2010
There were three sales in the Amagansett Dunes in the second quarter of 2010 (compared with four during the prior quarter). Overall, sales volume in the Hamptons was up about 20% over the prior quarter and about 90% over the same quarter last year.
Interestingly, all three sales in the Dunes this quarter were on Marine Boulevard, including one on the Ocean, which pushed the average and median prices way up this quarter. Last quarter the average and median prices were around $1.8 Million which is representative of most houses in the Dunes.
The current quarterly reports for all Hamptons areas show prices in the Hamptons rising, but this is a distortion based upon the increased level of high-end buying which has driven the average and median price calculations up in many markets over last year. Prices in the Hamptons have largely stabilized, including in the Dunes. Improved market conditions are attracting new sellers, and the financial markets are now strong enough to generate new buyers, so I expect that going forward there will be a rough balance between supply and demand and well-priced homes will sell relatively quickly.
The following properties transferred in the Amagansett Dunes in the 2Q 2010:
138 Marine Boulevard, $1,750,000
55 Marine Boulevard, $6,300,000
110 Marine Boulevard, $2,200,000
Average Price:$3,416,666
Median Price:$2,200,000
Notable Sales From my Weekly "Transaction Highlights" column in the Southampton and East Hampton Press:
138 Marine Boulevard. One of the best real estate investments I have analyzed for my transaction highlights column. Here it is:
This 1,300 square foot beach cottage with 3 bedrooms and fireplace on .23 acres is located on the best street in the Amagansett Dunes directly across the street from ocean-front homes. The cottage was built in 1960, and although today's environmental regulations prohibit expansion of the footprint, it has a one car garage and basement that could be converted to living space. There are virtually no grounds here, just a small front yard and rear patio. Seller purchased this home in 1992 for $80,000. This sale represents an enormous compounded annual return of almost 19%, triple the 6.5% national average, and property taxes and maintenance on this small home are likely to be exceptionally low. This sale is a classic example of the axiom that location is everything in real estate investing, and illustrates the enduring desirability and value of property near the ocean.
55 Marine Boulevard, Amagansett, $6,300,000
This oceanfront home in the Amagansett Dunes is sited on an excellent lot; .67 acres, much of it already cleared, with 110 feet of direct beach frontage. The house was built in 1973 and, at 4,000 square feet it is large for the Dunes neighborhood. Presently the house has 3 bedrooms, and although it is almost 40 years old, it is in excellent condition and contains an expansive cathederal-ceiling living and dining area with fireplace overlooking the Ocean. Although the house does not have a swimming pool, because the lot is fairly large and already substantially cleared, installation of a pool should be possible even though present day environmental standards make it extremely difficult to construct pools in the Amagansett Dunes, particularly on Oceanfront parcels. Seller purchased this house in 2006 at the height of the market for $5,125,000. Since that time, the financial markets, and its derivative, the Hamptons real estate market, have declined by about 30%. This is a rare example of a home that appreciated during the same period of time by about 5% compounded annually, which is especially dramatic in comparison to the devaluation of many other homes during the same period. The pattern we are beginning to see is that the rarest properties – high quality waterfront in this case and some land in others – have fared best in the down market. When supply is extraordinarily limited, it seems there will always be sufficient demand to support or even raise prices.
Amagansett Lanes Report – 2nd Quarter 2010
This was a slow quarter in the Amagansett Lanes with only two transfers, after 6 the previous quarter. We had quite a rush of sales in the Lanes in the last year or so since the very bottom of the market, and as a result there isn't a lot of ...
Southampton South Report – 2Q 2010
The following properties transferred in and around Southampton Village, South of the Highway, in 2Q 2010:
22 Captain's Neck Lane, $5,425,000
20 Henry Street, $1,550,000
78 West Prospect Street, $542,000
49 Pelletreau Street, $2,300,000
130 Harvest Lane, $1,250,000
75 Halsey Avenue, $1,150,000
520 Hampton Road, Unit 28, $740,000
21 Huntting Street, $2,200,000
5 Huntting Street, $4,100,000
134 Somerset Avenue, $1,442,000
Part ...
Sagaponack South Report – 2Q 2010
There were only 2 sales in Sagaponack South in 2Q 2010, compared with 15 in 1Q 2010. We will have to wait until later to see which quarter is more representative of this year’s norm, but it seems likely that 1Q 2010 represented a run on inventory that accumulated during the ...
