Quarterly Report Roundup – 2nd Quarter 2011
Quarterly Report Roundup – 2nd Quarter 2011
Reprinted from East Hampton and Southampton Press
August 3, 2011
by Phelan Wolf
Bullet Points on the quarterly data:
- Volume approaching pre-crash levels
- High-end becoming a seller’s market
- Low-end remains a buyer’s market
Brokerages in the Hamptons are reporting a significant increase in high-end sales in the second quarter of 2011. Less apparent, but also contained within the reports, are signs of continuing weakness in the low-end market.
The reports summarize the state of the market based upon closings that took place between April 1 and June 30 of 2011. As always, the major brokerages define the geography of the Hamptons differently, which accounts for some of the variation in reported data, which has been averaged for this analysis.
SALES VOLUME
There were approximately 460 deed transfers (sales) on the East End of Long Island in the spring of 2011. The spring and fall are traditionally the busiest quarters of the year for real estate sales in the Hamptons.
These 460 closings are almost exactly the same number that occurred in the spring of 2010. The nominal 4% volume increase that these closings represent are a good indicator of the markets steady improvement and overall stability.
Looking back at the ten year data, prior to the crash the average yearly sales volume in the Hamptons was approximately 2,000 closings, or 500 per quarter on a seasonally unadjusted basis. In 2008 and 2009, during the depths of the recession, volume was cut roughly in half to approximately 1,000 closings per year.
It is an open question as to when or if the Hamptons market will ever return to its pre-crash volume levels and whether it would be healthy for the market to do so, given that the 2,000 closings per year level occurred during a destructive housing bubble. But the fact that we are approaching 500 closings in one quarter, whether that goal is ever achieved, is an excellent sign of market recovery.
PRICES
The average price this quarter was $1,760,000, a hefty 18% increase compared to the prior spring. This jump in the average price calculation was influenced by a rush of ultra-high-end buying, including 12 sales over $8 Million, compared to 3 last spring.
High-end sales began strengthening more than a year ago, in the winter of 2010, when sales over $5 Million increased 300% from the 2009 bottom and the highest 10% of all unit sales accounted for almost 50% of dollars transferred. It took courage to jump into the high-end market at that time, when there were so few post-crash luxury sales no one could say with any certainty what such houses were worth.
Since the winter of 2010 high-end buying has slowly increased, with a significant move forward last fall. Just as sales volume overall is approaching pre-crash levels, this quarter the volume of sales over $5 Million comprised 4% of all sales, roughly the same proportion as prior to the credit crunch.
High-end inventory is being absorbed rapidly with the number of listings offered for sale and priced in the top 10% of the market dropping 30% compared to last spring. If luxury inventory continues to disappear at this rate, price increases at the top of the market are inevitable.
On a gloomier note, entry-level homes sales, which in the Hamptons are those that sell for under $1 Million, continue to exhibit weakness. While luxury inventory is tightening, overall inventory in the Hamptons increased by 4%, driven by newly offered sub $1 Million homes, which typically make up approximately 50% of all sales. This increased inventory stretched the average days on market from last asking price to sale from 131 days last spring to 188 days this quarter.
The median price, which reflects low-end activity much more accurately than the average price, shows the result of increased inventory and competition among low-end sellers. Three of the four brokerages reported small median price declines between -1% and -3%, with the fourth reporting an unlikely 14% increase.
FUTURE TRENDS
For the last two quarters I have concluded by predicting that the market throughout 2011 would be generally healthy and balanced with lots of low end inventory (and perhaps declining low-end prices) and increasing high-end activity (and perhaps increasing high-end prices). A close look at the market, divided into quintiles, clearly illustrates these trends.
The median price of the top 20% of sales this quarter was $3,605,000, an increase of 12% over the same quarter last year. The next 20%, with a median of $1,575,000 rose 9%. The middle 20%, priced at around $940,000, registered a slight increase of 4%. The fourth 20%, priced around $600,000, fell slightly, by about -2%. The bottom slice of the market, priced around $330,000, fell -6%.
Just as Dickens described “A Tale of Two Cities”, what is emerging in the Hamptons – and elsewhere in the U.S. – is “A Tale of Two Markets”.
Today the median price of houses located east of the Shinnecock Canal or south of the highway is approximately twice the median of homes west of the Shinnecock Canal or north of the highway. As high-end buyers flooded the market this quarter, the median price of houses that sold east of the Shinnecock Canal or south of the highway rose by 20% compared to the spring of 2010. At the same time, the median price of homes west of the Shinnecock or north of the highway fell by -6%.
As I have said before, the recession is over south of the highway and has been for some time, while it remains a buyers’ market far north of the highway and west of the canal, with high levels of inventory and significant numbers of distressed sellers. If these trends continue, and the “Tale of Two Markets” lengthens, it may become impossible to answer the question “How’s the Hampton’s Real Estate Market” without first asking “Which One?”
Quarterly Report Roundup – 1Q 2011
Quarterly Report Roundup – 1st Quarter 2011
Reprinted from East Hampton and Southampton Press
May 11, 2011
by Phelan Wolf
Bullet Points on the quarterly data:
- Volume dropped due to weather and tax concerns
- Low-end sales predominated after a rush of high-end buying in the fall
- Land sales continue to increase as good inventory is depleted and builders gain confidence
Brokerages in the Hamptons are reporting that sales volume dropped precipitously in the first quarter of 2011. The quarterly reports attribute the reduction in volume to weather and uncertainty regarding capital gains taxes.
The reports also indicate that average and median prices dropped. But a close reading of the reports over the last year, as well as anecdotal evidence, suggests that while the average and median price statistics fell in the first quarter, the Hamptons real estate market is actually relatively stable and showing some signs of improvement.
The reports summarize the state of the market based upon closings that took place between January 1 and March 31 of 2011. As always, the major brokerages define the geography of the Hamptons differently which accounts for some of the variation in reported data, which has been average for this analysis.
SALES VOLUME
There were approximately 295 deed transfers (sales) on the East End of Long Island in the winter of 2011. The first quarter is traditionally the slowest of the year for real estate sales in the Hamptons, which is a seasonal business.
These approximately 295 closings represent a dramatic 22% reduction in volume compared to the winter of 2010. This plunge in volume occurred across the board in almost all Hamptons sub-markets with the exceptions being Montauk and Bridgehampton/Sagaponack which showed nominal volume increases which were not large enough to be statistically meaningful.
Roads were difficult and driveways often impassable in the Hamptons this winter making it difficult, and in some cases impossible, to show houses.
In addition to the weather, the reports also blame uncertainty surrounding whether the capital gains tax rate would be raised beginning on January 1, 2011 (ultimately it was not).
Looking back at the reports for the fall of 2010, they show a significant rise in the average price statistic, up 13% from the previous fall, driven by an increase in luxury closings. In the fall there was a 50% increase in sales over $5 Million compared to the prior year quarter and the highest level of sales above the $5 Million mark in four years. It is entirely plausible that many of these closings were rushed in December of 2010 out of fear of increased gains taxes in January 2011.
Left unsaid in the reports is the possibility that some of the volume drop in the first quarter of 2011 resulted from generally declining market conditions.
After the market bottomed in the first quarter of 2009, volume increased steadily each quarter for 18 months. In the fall of 2010, for the first time since the market bottom, volume stopped increasing and stabilized. The first quarter of 2011 represents the first drop in volume in the last 7 quarters.
PRICES
The average and median price statistics each dropped by double digits in the first quarter.
The average price was $1,520,000, a 13% decline when compared to the prior winter (22% if one brokerage’s anomalous statistic is disregarded) and a 19% decline compared to the fall of 2010 when luxury buying was exceptionally strong.
The median price fell by 22% compared to last winter, to $779,000, meaning that 50% of properties sold for less than $779,000.
These statistics always tell us as much or more about the mix of buying activity as they do about the general direction of real prices in the market. Sales under $1 Million accounted for 62% of all sales this quarter, a big increase over the approximately 50% levels during the prior quarter and the prior-year quarter.
A sifting of the pricing data lends support to the notion that the poor results this quarter were strongly influenced by weather and tax concerns.
Entry level buyers are more likely to be local people who already live in the Hamptons and are less affected by the icy roads between New York and the East End. Regardless of their location, one of the enduring ironies of the Hamptons housing market is that entry-level buyers are much more likely to need financing than luxury buyers. These entry-level buyers may have felt some urgency to continue their search for a home this winter, notwithstanding the weather, while rates remained low.
Some entry-level sellers, having been hit hard by the drop in prices north of the highway as well as the effects of the recession on the local economy, have little or no equity in their homes. These sellers would have been much less concerned about possible changes in the capital gains tax rates than the luxury sellers who drove the market in the fall.
FUTURE TRENDS
Looking past sales volume and pricing, there are additional data points that show the general health and stability indicated by the 2010 reports did not dissolve in the winter of 2011.
The listing discount – the difference between last asking price and sales price – is relatively unchanged and has been hovering around 10% for the last calendar year. We still see some homes that are priced unrealistically and sell for much less than the asking price, and some buyers that are making “low-ball” offers. But many buyers and sellers have set aside their unrealistic expectations and understand the market well enough to agree on a price.
Perhaps most importantly, in terms of forecasting the “bullish” vs. “bearish” sentiment among buyers and sellers, land sales actually increased 13% versus the prior-year quarter. This is an important sign of strength in the market, indicating that builders remain confident, and end-users, facing a depleted supply of the best houses in the best markets, are beginning to build again.
No one quarter makes a trend, and we won’t know for some time if weather and taxes were entirely responsible for the volume drop in the winter of 2011.
Anecdotally, sales have been rapid once again this spring and it appears that once the snow and ice melted the market quickly regained its footing. Serious buyers came out as soon as the weather began to break in February. By the end of March the best rentals were gone – and for the entire season -- which is a dramatic change over all of the previous post-crash rental seasons which were dominated by tenants with smaller budgets looking for last-minute short-term rentals at bargain prices.
I concluded last quarter’s report by predicting that all of 2011 would look much like the end of 2010: a generally healthy and balanced market, lots of low-end inventory (and perhaps declining low-end prices), increased high-end activity (and perhaps increasing high-end prices in select markets) and a “gold-rush” mentality among those seeking lots and tear-downs south of the highway. I’m going to declare “winter-rules”, take a mulligan, and renew these predictions for the remainder of the year so long as Mother Nature and Congress cooperate by staying out of the way.
Quarterly Report Roundup – 4th Quarter 2010
Quarterly Report Roundup – 4th Quarter 2010
Reprinted from East Hampton and Southampton Press
February 16, 2011
by Phelan Wolf
Bullet Points on the quarterly and year-end data:
- Prices and volume generally stable
- Luxury sales volume rapidly increasing
- Land and Tear-Down sales south of the highway very strong
Fourth quarter and year end market reports issued by brokerages in the Hamptons indicate that the market was healthy and stable throughout 2010. Sales volume increased steadily throughout the year. Prices were largely flat without trending strongly up or down on a sustained basis. But average prices rose in the fourth quarter as high-end buyers returned to the market in numbers not seen since the crash. These high-end buyers followed a rush of entry-level buyers who led the way earlier in the year.
The reports summarize the state of the market based upon closings that took place between October 1 and December 31 of 2010. As always, the major brokerages define the geography of the Hamptons differently which accounts for some of the variation in reported data, which has been averaged for this analysis.
Quarterly Results
There were approximately 334 deed transfers (sales) on the East End of Long Island in the fall of 2010. Volume was essentially the same as the fall of 2009. Prior to the fall of 2010, volume increased every quarter when compared to the same quarter in the prior year, for six quarters in a row, as the market recovered from almost no volume following the crash. Today’s healthy and sustainable volume levels roughly approximate the average volume levels over the last decade.
Additional signs of market health and stability include total listing inventory and average days on market. Both figures in the fall of 2010 were virtually unchanged from the fall of 2009 as equal numbers of buyers and sellers are now participating in the market. The listing discount – the difference between the last asking price and the sales price – is also stable at approximately 10% as post-crash values are now widely understood among all market participants in virtually every market sector and neighborhood.
All the reports highlight the fact that the average price increased substantially in the fourth quarter versus the prior year quarter. The average price calculation was $1,878,000 this quarter, a 13% increase from the fall of 2009. This is a substantial increase, and it is significant. It does not mean that the value of most homes is increasing. But it does mean that luxury buyers are rapidly re-entering what has been a market dominated by entry-level buyers.
Last quarter, the big story was the fact that 67% of all sold homes traded for less than $1 Million – much higher than the 50% average figure – as first time buyers rushed to take advantage of historically low interest rates. This fall, as high-end buyers returned, the number of houses selling for more than $5 Million rose by more than 50% compared to the fall of 2009. The total volume of sales over $5 Million was the highest in any quarter for the last 4 years, since the pre-crash market high in 2007.
Year End Trends
Throughout 2010, the sale of vacant land, tear-downs, and renovation candidates continued to be one of the strongest sectors of the market. The volume of land sales in 2010 was up more than 90% versus the prior year. These land sales drove the total dollars spent on land in the year up more than 180% when compared to 2009.
Owners and builders are making big bets on continued demand for new homes in the best south of the highway neighborhoods. One acre lots and tear-downs in good locations from East Hampton to Southampton priced appropriately in the $2.5 Million to $4 Million range are selling as soon as they become available. But there is little or no building activity north of the highway, particularly far north in traditionally year-round neighborhoods.
The recession is over south of the highway, and has been for some time. It remains a buyers market far north of the highway, with high levels of inventory and significant numbers of distressed sellers. But many local builders and architects are reporting heavy demand for their services in 2011, and increased demand for construction, landscaping and other services south of the highway should begin to support the north of the highway housing market in the coming year.
In the end, the Hamptons market is effectively a derivative of the broader financial markets, and so long as Wall Street continues to recover, the Hamptons real estate market will continue apace. Higher interest rates are coming, sooner or later, and when they do they will have a negative impact on the entry-level market, where first time buyers often use all the leverage available to stretch their finances.
I concluded last quarter’s report by predicting a “rush of high-end buying” in spring after Wall Street bonus season and encouraged luxury buyers who were able to act prior to that date to “go to contract before their competitors follow”. It appears that many high-end buyers were thinking along the same lines and seized the moment to buy in the fall. For a year-end prediction, I expect the four quarters of 2011 to look much like the last quarter of 2010; a healthy, balanced market with equal numbers of buyers and sellers and stable volume, lots of low-end inventory (and perhaps declining low-end prices), increased high-end activity (and perhaps increasing high-end prices in select markets), and a “gold-rush” mentality among those seeking lots and tear-downs south of the highway.
4th Quarter Reports and Media Coverage
All the 4th Quarter Reports are out and I am busy reading them for my quarterly review which will appear in the President's Day Weekend edition of the East Hampton and Southampton Press.
The major theme in all the reports is the increase in the average price statistic. This doesn't mean prices are actually rising, although they may do so in select markets in the year ahead, while continuing to fall in others. But while the 3rd quarter was dominated by under $1 Million entry-level buyers, this quarter shows that the "smart money" is moving off the sidelines back into the market. Lots and tear-downs in the best neighborhoods sold briskly during all of 2010. Now it looks like more big houses are selling too.
Here are some sources for further reading...
Prudential's report, which is consistently the best, can be found here.
Corcoran's report, which is a year-end report and doesn't have quarterly data, is here.
Town and Country's quarterly and year-end reports are here.
Brown Harris Stevens hasn't posted their report (although they have released it). When it is posted, it will be here.
Additional media coverage...
The NY Post has an article/press release/puff piece on the Prudential report here. They note the increasing number of high end sales:
There were 38 sales of homes for $5 million or more in the final three months of 2010, compared with 24 at that time in 2009. It was the largest number of sales since the bad old days of September 2008, after the collapse of Lehman Brothers and the downturn on Wall Street.
The recovery of the securities industry is helping to boost sales because, Miller said, "the East End and Wall Street are joined at the hip, at least over the last 10 years."
Crains NY Business highlight's the split market north and south of the highway:
South of the “highway”—also known as Route 27—an area best known for its oceanfront properties, median sales prices rose 17% to $945,000 from the same quarter in 2009. This segment of the market always remained strong, aided by the relative scarcity of land to develop, noted Ms. Herman. However, north of the highway, median sales prices fell 8.7% to $890,000 from a year earlier.
Bloomberg notes that the ratio of high-end to low-end houses is returning to normal:
“The mix is returning to a normal distribution of sales,” Miller said in an interview. “On the upper end, the activity is more robust relative to the lethargic level of activity over the last couple of years.”
The Real Deal’s Top 10 of 2010
Here's the Real Deal's List:
1. 239 Gibson Lane, Sagaponack -- $43.5 million
2. 86 Lily Pond Lane, East Hampton -- $25.5 million
3. 2 Tyson Lane, East Hampton -- $22.88 million
4. 12 Tyson Lane, East Hampton -- $19.26 million
5. 229 Quimby Lane, Bridgehampton -- $16.2 million
6. 500 Ox Pasture Road, Southampton -- $16 million
7. 55 Dune Road, Bridgehampton -- $14.25 million
8. 120 Halsey Neck Lane, Southampton -- $14.21 million
9. 102 Lily Pond Lane, East Hampton -- $14 million
10. 16 Association Road, Wainscott -- $13.75 million
Georgica Report – 3Q 2010
There were six sales in Georgica in the third quarter of 2010, compared with ten in the first quarter and three in the second quarter.
The big story in the overall Hamptons market this quarter was the increase in low-end activity and decrease in high-end activity. In the third quarter, approximately 67% of all sales were homes priced under $1 Million. Overall, volume was roughly stable with a similar number of sales in the same quarter last year. Volume has returned roughly to pre-crash levels.
One of the strongest segments of the market is the sale of vacant lots, renovations, and tear-downs south of the highway. Land sales doubled in volume compared to the prior year quarter and sold at an average price of over $1 Million – 40 percent higher than last year. The average price of sold homes south of the highway dropped 21 percent versus the prior year quarter, not because of falling prices, but because of increased interest in tear downs and renovation candidates.
This quarter in Georgica, 2 of the 6 sales fall into the construction candidate category. The most notable sale this quarter was 86 Lily Pond Lane, which sold for the highest price in East Hampton this year to date, $25,500,000.
A distressing trend highlighted in last quarter’s Georgica report continues this quarter – there still have been no sales on Georgica Pond since the crash. In my weekly column I wrote recently about the lack of pondfront sales throughout the Hamptons. This year, only 3 pondfront homes have sold in the Hamptons at over $3 Million. During the same period, around 10 oceanfront homes sold, and many more on the bay.
As a result, some extraordinary pondfront inventory remains for sale throughout the Hamptons – including on Georgica Pond.
Sales in Georgica in 3Q 2010:
8 Pudding Hill Lane, $7,200,000 (Spec. house built in 2006, 5,600 sq.ft.)
6 Apaquogue Road, $2,420,000 (Small renovated cottage)
191 Georgica Road, $3,000,000 (Renovation candidate – land value)
57 Georgica Road, $6,480,000 (Built in 2000, 7,000 sq.ft.)
86 Lily Pond Lane, $25,500,000 (Historic cottage, highest price in EH this year)
19 Georgica Road, $4,375,000 (Renovation candidate)
Average Price: $8,162,500
Average Price without 86 Lily Pond: $4,695,000
Median Price: $5,427,500
Median Price without 86 Lily Pond: $4,375,000
Notable Inventory
17 Jericho Road. $3,999,000. Beautiful new construction. Excellent value – recommended – my listing.
Oceanfront
7 West End Road. $32,000,000. Amazing tear-down on the ocean with guest cottage on the Dunes.
211 Lily Pond. $25,000,000. Iconic 12,000 square foot shingle-style oceanfront Cottage.
Georgica Pond
5 Eel Cove Road. $28,900,000. Spectacular 5,000 square foot turn-key home with approximately 750 feet of frontage offering sweeping Pond and Ocean Views. Located within the private Georgica Association. One of the best sites on the Pond – highly recommended – also available for rent for the year or season.
30 Wainscott Stone Highway. $19,995,000. Enormous home with very small creek view.
24 Goose Creek Lane. $12,900,000 – reduced from $18,500,000 – motivated sellers. Tear down on 4.9 acres. Pond View.
Notable Sales From my Weekly "Transaction Highlights" column in the Southampton and East Hampton Press:
8 Pudding Hill Lane, East Hampton, $7,200,000
This .9-acre lot is located in Georgica, the original estate area of East Hampton, near the village center and Main Beach. It is on an historic street named for a locally famous Revolutionary War incident in which British soldiers were angrily pursued by a woman threatening to pour hot pudding on them.
The seller purchased this property in 2006 for $4,600,000 and in 2008 constructed a new 5,645-square-foot traditional home with five bedrooms, paneled living room and dining room, a light-filled office, and five fireplaces.
Assuming a construction cost of $450 per square foot, plus $100,000 for a new gunite pool and landscaping, it looks like the seller was a victim of bad market timing and this sale represents approximately a break-even proposition, not including soft costs such as tax, title, legal, architect, survey and brokerage fees.
6 Apaquogue Road, Village of East Hampton $2,420,000
This home is located south of the highway in the Georgica section of East Hampton Village. It is on a .13-acre lot, tiny for this neighborhood where lots of at least 1 acre are typical. The cottage-style house is 2,500 square feet, with open kitchen and dining area, living area with fireplace and four bedrooms. Outside, there is a pool house, patio, lap pool and small yard. The house was built in 2007, and is attractive and well-built.
The seller purchased this property with a small pre-existing cottage in 1996 for $650,000. Assuming a construction cost of $450 per square foot, plus $175,000 for pool house, patio, pool, landscape and driveway, the seller’s construction cost was $1,300,000 and basis was $1,950,000. From that perspective, this transaction appears profitable. If these figures are correct, this sale values the lot at $1,120,000, an astonishing figure for a .13-acre lot. But it is in one of the very best locations in East Hampton and shows the immense value placed upon property in the Georgica area.
A closer look at the numbers shows that $650,000 compounded annually at the typical inflation rate of 4 percent per year, from 1996 to 2010, returns a value of almost exactly $1,120,000 today. So assuming that the cottage which existed on this lot in 1996 did not have a great deal of value, it appears that the cost of this lot, on an inflation-adjusted basis, has been stable for many years. From an investment perspective then, the seller made little or no money on the initial $650,000 house purchase, but safeguarded her capital while using and enjoying her cottage by the beach for many years.
191 Georgica Road, Village of East Hampton, $3,000,000
This house was built in 1950 and is approximately 2,000 square feet. Although in good condition, it is dated and not up to today's current standards in the Georgica neighborhood. It contains many features typically not included in better homes today including low ceilings, a small kitchen with formica countertops, wall to wall carpeting, vertical cedar siding inside and outside the home, and a partial basement.
However, this property is in an excellant location, on a flag lot in the heart of Georgica within biking distance to Georgica Beach. An existing pool and patio are lovely and up to today's standards, and there is a detached garage/studio which may be valuable depending upon its legal use. As a general rule the standard value assigned to a frame and foundation of this quality would be $150 per square foot. Because the interior features are fine here, but dated, the main house might be appraised at $200 per square foot, plus $200,000 for garage, pool, patio, driveway and landscape. The remaining balance -- $2,400,000 -- represents the approximate land value of this 1.3 acre lot which holds significant potential.
Assuming that the new owner tears this house down, as seems likely because it is not a good candidate for renovation, it appears that the buyer was willing to pay approximately $2,800,000 for this lot, plus $200,000 for the garage, pool and other outside improvements which will remain. This is right in line with a similar recent sale on East Hollow road around the corner, when an existing house was sold for $2,900,000 and completely torn down. Based upon these transfers, it seems that a good 1 acre building lot in Georgica is worth just less than $3,000,000 today, and both of these sales are a good indication that in the best neighborhoods in the Hamptons there is renewed optimism as the building cycle starts again.
57 Georgica Road, East Hampton Village, $6,480,000
This 7,000-square-foot home was built in 2000 and has six bedrooms, seven and a half baths, three fireplaces, an attached garage and finished basement. The home is nicely finished with coffered ceilings, tasteful built-in cabinets, wood paneling and appealing light fixtures. The expansive kitchen has gourmet appliances and marble finishes.
A home such as this one costs about 50 percent more to build than the typical $300-per-square-foot construction and might be reasonably valued at $450 per square foot. The landscaping, gunite pool, patio and pool house could easily cost another $500,000. Assuming those values are correct, this very private 1.2-acre lot in the Georgica area would be valued a little under $3 million, a price which is supported by other recent sales and is the current market value for a standard 1-acre lot in this neighborhood.
86 Lily Pond Lane, Village of East Hampton $25,500,000
This appears to be the highest price paid for any real estate in the Town of East Hampton so far this year, with the previous record-holder being a twenty year old oceanfront home. This house is approximately 10,000 square feet, one of the original "cottages" built around the turn of the century in the original estate area of East Hampton, Georgica, which was colonized following the construction of the first railroads
around the same time period.
The first estate lots were very large, having occupied previously farmed land on the flat plain south of the main road connecting East Hampton and Southampton. Over time, most all of these lots were subdivided. However, this 3 acre lot is the last parcel that still stretches between Lily Pond Lane and Lee Avenue, although it lacks deeded ocean access.
While this house is in good condition, it is dated by today's standards and has not been renovated. It contains 9 fireplaces, 10 bedrooms, and numerous extraordinary paneled living, sitting and dining rooms with period details intact. The grounds hold a pool, tennis court and guest cottage.
Houses of this caliber, in this condition, are exceptionally rare, and the valuation of them is more art than science. For many reasons it is not possible to exactly replicate an old estate and create a truly "new old house". As houses with history that were built to the highest standards become rarer and rarer over time as a result of tear-downs and decay, the basic laws of supply and demand will dictate that those that remain sell for higher and higher premiums.
19 Georgica Road, Village of East Hampton
This 3,500 square foot carriage style house was built in 1920. In size, proportion and design it is representative of a type of home that was once common in the Hamptons. Downstairs, a living room with fireplace, formal dining room, eat-in kitchen and powder room. Upstairs, four bedrooms and three baths.
Although the interior finishes have been updated in this house, they are not extravagent, and some period details such as wood walls and a steep and narrow staircase remain. The 1.4 acre lot, located in the Georgica neighborhood, has mature landscaping and a generously sized gunite pool in the center of an expansive, sunny lawn. At $300 per square foot, plus $250,000 for the outside improvements, this sale values this lot at just over $3,000,000, which is land value for a typical 1 acre buliding lot in Georgica today.
In Georgica, and elsewhere south of the highway, a large portion of the sales recently have been homes such as this one; older, smaller, and more modest than the big new houses built before the crash. It remains to be seen whether these homes are admired by their new owners for their inherent charm, or if their principle attraction is their potential to be torn down or renovated so extensively as to become unrecognizable.
Amagansett Dunes Report – 3Q 2010
There were five sales in the Amagansett Dunes in the third quarter of 2010, with approximately the same number being sold in the prior quarters of the year.
The big story in the Dunes this quarter -- and so far this year -- is the "cherrypicking" of the best Dunes inventory. Last quarter, all three sales were on Marine Boulevard. This quarter, three of the five sales were Oceanfront on Marine Boulevard. Of the twelve homes that have sold in the Dunes this year, 6 have been on Marine and 3 have been on the Ocean. As a result of these high-end sales, the average price in the Dunes during the third quarter was driven up over $5,500,000 which is far beyond the true average value of a home in the Dunes.
The Dunes market remains competitive, with more than forty homes for sale. We will have to wait and see if the high-end purchasing trend continues. In addition, there is a strong-appetite for fixer-uppers in the Dunes, particularly those that have large footprints and swimming pools, as both are hard to obtain today due to environmental constraints.
The following is the full transfer data for the quarter, along with selected analysis from my "Transaction Highlights" weekly newspaper column.
Sales in the Amagansett Dunes - 3Q 2010:
8 Ocean Lane, $2,900,000
117 Marine Boulevard, $7,500,000
39 Marine Boulevard, $6,500,000
97 Marine Boulevard, $10,350,000
47 Treasure Island Drive, $962,500
Average Price: $5,642,500
Median Price: $6,500,000
Notable sales reprinted from my "Transaction Highlights" weekly column:
117 Marine Boulevard, Amagansett, $7,500,000
39 Marine Boulevard, Amagansett, $6,500,000
Both of these houses were built in the late 1970s and both are on approximately .7-acre lots, which are large for oceanfront parcels in the dunes.
Number 117 is traditional-style 4,500-square-foot home with eight bedrooms, three fireplaces and a one-car garage. It also has a pool, which is very valuable because today’s zoning laws make it very difficult to construct a pool within significant distances from protected natural features such as bluffs and dunes.
Number 39 is a contemporary 3,129-square-foot home with five bedrooms, one fireplace and a one-car garage. There is no pool, but it may be possible to construct one.
Although these houses were built within a year of each other, number 39 has been updated and the house on it would cost more to construct today. But in environmentally sensitive areas such as the dunes, where it can be difficult or impossible today to expand an existing house, the size of an existing structure is often as important as its condition.
Here, number 117 is more than 1,000 square feet bigger, and its traditional style makes it easy to renovate; it is essentially an empty canvas. The size and style of this house, as well as its existing oceanside swimming pool account for the difference in prices.
Both owners did very well on their sale from an investment perspective. Number 39 was purchased in 2000 for $2,600,000—this sale represents a gross compounded annual rate of return of almost 10 percent per year, although it should be noted that it appears that the owner may have done substantial interior renovations. Number 117 was purchased for $1,750,000 in 1996; this sale represents an 11 percent annual rate of return.
Both are terrific returns considering that these properties were held during the recent downturn, as well as the fact that their owners were able to use and enjoy these properties, or rent them out, for many years in addition to profiting on their sale. Even in the worst of times, it seems that oceanfront property, which is inherently limited and always in demand, never goes down in value.
97 Marine Boulevard, Amagansett, $10,350,000
This is the fourth oceanfront house in the Amagansett Dunes to sell this year. The others sold for between $6,300,000 and $7,500,000 with this being the most expensive Amagansett oceanfront sale this year. This is a very high number of houses in a small slice of the market indicating high demand for homes in the Dunes in general, as well as a general recognition that these houses are an excellent value compared to other oceanfront properties in the Hamptons.
This traditional shingle style home was built in 2004 and is 4,000 square feet, with 4 bedrooms. In addition to the usual large living/dining/kitchen areas, the downstairs includes an office and a lovely semi-circular sunroom/den. There is also a 1 space garage. Most importantly, the house has a large pool and deck on the Ocean side of the house, as well as a walkway from the deck to the Ocean.
As a general rule, construction on the Ocean is very difficult because of environmental restrictions, with one of the most important limiting factors being setbacks from the crest of the Ocean bluff. As a result, Oceanside pools and walkways are not always possible. However, the present Town Board has been loosening environmental restrictions, including bluff setbacks (so far in Montauk only) so in the future we may see easier and more intense development of oceanfront lots.
As is typical with Oceanfront properties, most of the value here is in the land. Valuing this house at $400 per square foot, plus $200,000 for pool, deck, walkway, driveway, landscape and garage results in a total value of all improvements of $1,800,000. Therefore, this transfer implies a land value of just over $8.5 Million. But built into that figure is the right, under the zoning laws, to continue to use and maintain a large home with oceanside pool and walkway to the beach. A similarly sized vacant lot, without building permits and with uncertain development possibilities, would be worth less.
47 Treasure Island Drive, Amagansett, $962,500
This 1950’s cottage is only 690 square feet and sits on .14 acres. The interior contains one public space with a galley kitchen, living area, and small dining table. The remainder of the cottage is two small bedrooms and one bath. Although small, the sellers succeeded in making the cottage attractive. It is clean and sparse, with fresh white paint, cathedral ceilings, bright yellow countertops, and chic light fixtures and blinds. The outside improvements include a small deck behind the cottage. But the deck overlooks a 16 acre dune reserve, and the lot itself is located very close to the Ocean, with deeded access nearby. This neighborhood, the Amagansett Dunes, was mostly developed in the 1960’s and 1970’s. In this neighborhood, and similarly in Ditch Plains in Montauk, we are witnessing a great deal of generational turnover as young people who do not need large family-sized homes but want to surf and swim in the ocean gradually replace the previous generation of owners. Ditch Plains is the most affordable walk to ocean neighborhood in the Town of East Hampton, but it is remote compared to Amagansett. Those who can afford the more convenient drive to Amagansett from New York, and want to be able to walk out of their house and onto the beach are paying an extraordinary premium to do so. At $200 per square foot, this cottage is worth no more than $150,000, and if that is the case, this sale values this .14 acre lot at more than $800,000!
Does this mean that if the same sized lot next door was vacant it would sell for $800,000? Not necessarily. Valuation in environmentally sensitive areas such as the Dunes is much more complicated than in an ordinary suburban tract-home context. There are strict rules governing clearing throughout the Town of East Hampton, and building within prescribed distances from wetlands, dunes, bluffs, species of native plants and other protected natural features. As a result, newly clearing a vacant lot in the Amagansett Dunes almost always requires discretionary permits from boards populated by lay-people nominated by the Town Board. Additionally, there are a number of well-known local environmental activists who live in and around Amagansett and keep a close eye on building in the Dunes. These activists are not averse to speaking up at Zoning Board hearings, and have given rise to the Amagansett nickname “I’m Against It” among the local building community.
In this case we know that the lot is buildable, because the house at 47 Treasure Island drive has been in existence since the 1950’s. It is already pre-cleared and has a small lawn even though today it is very difficult to receive approval to clear more than absolutely necessary and install a lawn in the Dunes. Whether expansion is a real possibility is an open question which cannot be answered without a survey not only of the house but of the surrounding area up to the limits of the jurisdiction of the Zoning Board. But the current political climate in East Hampton is one of loosening regulatory control following the Republican take-over of the Town Board last year. Some Zoning rules have been relaxed, and developers and their allies are being appointed to building oversight Boards. So predicting the future value of a property such as this one can become complicated by environmental and political uncertainties. If the past is prologue however it is likely that even if the new owners leave this cottage as-is they can expect a fine return. Small homes on good lots close to the Ocean are consistent winners over time because of low taxes, maintenance, and insurance, and seemingly endless demand to be near the Ocean. The sellers purchased this home in 1999 for $345,000. While they likely did a cosmetic renovation of the interior, it couldn’t have cost much to refinish less than 700 square feet. Although their renovation costs are unknown, this sale represents a gross return of about 10% compounded annually, a very nice return not including the use and enjoyment of a cottage by the sea.
Waterfront Report – 3Q 2010
Waterfront properties continued this quarter to show that their values have, in many cases, held up strongly through the crash.
The broader Hamptons Market reports showed reduced average and median prices this quarter, as a result of strong selling in the under $1 Million market and weak high-end sales. It continues ...
Quarterly Report Roundup – 3Q 2010
Quarterly Report Roundup – 3rd Quarter 2010
Reprinted from East Hampton and Southampton Press
November 3, 2010
by Phelan Wolf
Bullet Points on the overall data:
· Prices and Volume generally stable
· Low-end activity is strong (good time to be a low-end seller)
· High-end activity is weak (good time to be a high-end buyer)
· Land ...
Bloomberg on the 3Q 2010 Reports
Bloomberg quotes the Prudential economist as follows:
“What it suggests to me is not that there was a sharp drop-off in pricing, because there wasn’t,” said Jonathan Miller, the president of Miller Samuel. “It’s a shift in the mix. We had a drop in upper-end sales ...
