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 2008/2009 crash. 

For comparison purposes, overall sales volume in the Hamptons was up about 20% in 2Q 2010 vs. 1Q 2010 (and about 90% compared to 2Q 2009).

Last quarter in Sagaponack South the average price was about $5,600,000 and the median about $4,500,000.  I regard these numbers as generally accurate; the calculations for this quarter, consisting of 2 sales only, are essentially meaningless.

The current Hamptons quarterly reports also show prices 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 in my view are likely to be stable in the foreseeable future.  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 Sagaponack South of the Highway in 2Q 2010:

190 Hedges Lane, $6,100,000

239 Gibson Lane, $43,500,000

Average Price: $24,800,000

Median Price:$24,800,000

Notable Inventory.  There are about 60 properties presently for sale in Sagaponack South.

Oceanfront:

39 Fairfield Pond Lane.  Spectacular 3.6 acre oceanfront site with older home.  $29,950,000.

137 Crestview. New home on 2.4 acre site.  $26,750,000

747 Daniels Lane. New home on 1 acre.  $23,995,000.  Adjacent house also available for compound possibility.

3 Fairfield Pond Lane. 1990s contemporary on 1.8 acre site with views of Fairfield Pond. $19,995,000

Notable Sales From my Weekly "Transaction Highlights" column in the East Hampton and Southampton Press:

39 Gibson Lane, Village of Sagaponack, $43,500,000

This Oceanfront estate is the highest priced sale to date this year in the Hamptons.  At 6.5 acres, this double lot is twice the size of its immediate neighbors with approximately 500 feet of Ocean frontage.  The improvements include a 6,200 square foot, 6 bedroom house, guesthouse, pool, tennis court and multiple decks and patios including a walkway to the beach.

This is a unique property and there are few comparable sales which can be used to evaluate the price.  The Seller received this home in a divorce settlement in 2002; it was purchased by her former husband in 1986 as vacant land for $1.4 Million.  He constructed the residence in 2000.  At this price point construction costs can be widely divergent based upon the quality of construction and finishes selected.  Oceanfront building is especially expensive because the salt air requires costly exterior upgrades.  It would not be unreasonable for the construction of such a house to cost $1,200 per square foot today, and for the pool, landscape, tennis court, patios and decks to cost $1 Million.  Using these figures, and accounting for the additional cost of the guest house, we can easily arrive at $10 Million as a round number to assign for the value of the improvements, which would make the land value here approximately $33 Million.

If the land is presently valued at $33 Million, and Seller’s husband purchased it for $1.4 Million in 1986, this land has appreciate at approximately 15% compounded annually over the last 24 years, a typical  return for land of the highest quality in the Hamptons.  While rental prices are not publicly recorded, and are often the subject of rumor and distortion, it was widely reported that this house rented last season for $900,000.  If true, then in addition to its potential for equity appreciation, this home has the potential to provide a gross rental income of approximately 5% of its sale price each year, which is a typical rental return in the Hamptons today at many price points.