Click to enlargeLast year, Long Island real estate broker Maggie Keats worked with a young family looking for houses in Sands Point priced up to $2.5 million. But the family didn’t buy anything, and when they started looking again this spring, they’d changed their price point.
“They came to me and said, ‘We’ve reevaluated our budget. If we’d bought last year we could have spent that much, but we just don’t feel comfortable doing that now,’” said Keats, who works in Prudential Douglas Elliman’s Manhasset office.
In late June, her clients finally bought a Sands Point home, paying around $1.8 million for a slightly smaller house than they’d originally envisioned.
After a prolonged real estate slowdown, housing markets in New York City suburbs are finally starting to see a recovery. But while luxury Manhattan homes are currently selling faster than more modestly priced properties, the opposite is true in many suburbs. While activity is on the rise for cheaper suburban homes, pricey houses in some of these areas — especially those with long commutes into the city — are sitting on the market, brokers said.
Suburban homes priced between $2 and $3 million have seen “a clear drop-off in sales activity this year to date,” said Jonathan Miller, CEO of Miller Samuel Appraisers.
That trend is particularly apparent on Long Island, which saw just 44 sales priced between $2 and $3 million from January to mid-June of this year, down from 61 in the same period in 2011, according to data compiled by Miller.
Long Island, as well as Fairfield and Westchester counties, have also had fewer properties priced over $3 million trade this year than last year, although the total number of transactions for all three areas has increased.
One major reason for this trend is the continuing credit crunch. Many high-end buyers are young families moving from Manhattan, with one or both parents working on Wall Street. Five years ago, these buyers would have put a 10 to 15 percent down payment towards their purchase; today, they’re required to put down 30 percent, or even as much as 50 to 60 percent, brokers said.
As a result, buyers who previously would have stretched to buy a home priced above $2 million are now choosing to play it safe with slightly less expensive purchases. And those choices are having a noticeable impact on the housing market in some suburban communities.
“A lot of the architects we work with have mentioned that they’re building houses between 4,000 and 6,000 square feet, versus 8,000 to 10,000 square feet” during the boom, said Alison Bernstein, head of the Suburban Jungle Realty Group, which works with buyers leaving the city for suburbs in Connecticut, Long Island, New Jersey and other areas.
“People are being more conservative with what they want to buy,” she added. “They don’t want to risk everything if something happens.”
Lately, in particular, those fears have been stoked by the economic crisis in Europe.
“Nothing breeds caution like uncertainty,” Miller said. “I think a lot of that has to do with the uncertainty in Europe.”
The Manhattan real estate market is also impacted by weakness on Wall Street, but it’s not as vulnerable as the suburbs, brokers said, in part because of New York City’s appeal to international buyers.
“The international rich believe that Manhattan real estate is — and will remain — a safe investment,” said Gary Malin, president of the Manhattan brokerage Citi Habitats.
To get a sense of how high-end homes are faring in various communities, The Real Deal checked in with brokers in some of the city’s most sought-after suburbs.
On Long Island, sales of homes priced between $2 and $3 million have fallen nearly 30 percent year-on-year, despite an overall uptick in the number of sales in the area, according to Miller’s data. (He noted that his data comes from the Multiple Listing Service of Long Island, which focuses mostly on Nassau and Western Suffolk counties.)
Keats, who is based in Nassau County, said she’s seeing healthy activity on homes listed below $2.5 million. But houses priced higher than that, she said, “just aren’t getting the viewings, they’re sitting on the market longer, and they are taking deeper price cuts.”
A major reason for that, several other brokers reiterated, is that buyers can no longer borrow as much money as they did during the boom.
Before the financial crisis, “you could put 10 percent down — you were able to buy more house,” said Shawn Elliott, the founder of Shawn Elliott Luxury Homes and Estates in Woodbury, Long Island. “Today, you’ve got to have 30 percent down, and you’ve got to have a credit score of around 700. It’s changed.”
Fears about the economy are also playing a role.
“People are just more conservative,” Keats said. “I think everyone is very uptight, and very few people have that much job security.”
In Connecticut’s Fairfield County, sales climbed 9.4 percent in the first six months of 2012, according to Miller. But average prices dropped 9.3 percent to $618,185, from $681,467 at this point in 2011. And the area has seen a steep drop in homes priced over $3 million, with 31 houses trading so far this year, down 40 percent from 52 in the first half of last year.
In pricey Greenwich (which is excluded from Miller’s overall Fairfield statistics because it has a separate MLS), sales over $2 million are down 30 percent this year compared to the same period in 2011, according to Mark Pruner, a Prudential Connecticut Realty broker in Greenwich. By contrast, “the under-$2 million market is up 30 percent,” said Pruner, who blogs about real estate at GreenwichStreets.com.
Many Fairfield County residents commute to Wall Street, he said, so changes in compensation for financial workers have had a significant impact on the area.
Instead of paying bonuses in cash, “investment banks are giving out more of their bonuses in stock options, many of which will vest over the next three years,” he said, “and the value of those are just uncertain.”
In Westchester County, the average price of a home sold so far in 2012 is $782,077, down from $802,414 at this time last year, according to Miller. That’s despite the fact that a total of 1,611 homes have traded this year, up from 1,476 in the first six months of 2011.
“We’re sitting at the highest level of pending sales since 2005,” said Houlihan Lawrence COO Chris Meyers. “This is a full-fledged recovery, and the first time we can say that since Lehman Brothers.”
And yet, sales of luxury homes have lagged behind. So far this year, 29 Westchester homes priced over $3 million have sold, compared to 32 last year. And northern Westchester towns like Bedford, North Salem and Chappaqua are suffering from “low demand” in the $2 to $3 million range, Meyers said.
Muffin Dowdle, a top broker at Ginnel Real Estate in Bedford Hills, said she’s now seeing fewer Wall Streeters with young families moving to the area. “That guy that was going to buy that 6,500-to-7,500-square-foot new house — he is waiting to make sure he still has his job and the stock market chills out,” she said.
Brokers noted, however, that homes in towns like Rye, Port Chester and Scarsdale, which are only around 30 to 45 minutes by train from Manhattan, are faring better than those in Northern Westchester.
As of mid-June, Houlihan Lawrence had 84 listings in Northern Westchester, but just 11 pending sales, Meyers said. By contrast, southern Westchester had 116 listings and 52 pending sales.
The $2 to $3 million market in New Jersey’s Bergen County is still struggling, though it seems to be faring a bit better than last year.
So far in 2012, 29 homes in the $2 to $3 million range have sold, according to Dr. Ruth Miron-Schleider, owner and broker of Miron Properties in Bergen County. In the first half of last year, 24 properties in that price bracket were sold. Still, that’s far below the 39 that sold in the first six months of 2008.
Buyers who, in the past, would have looked at homes priced between $2 and $3 million “are now generally looking for mid-$1 million houses,” Miron-Schleider said.
In particular, Bergen County buyers are now very focused on how much they’ll be paying in maintenance charges and taxes, she said. Bergen has historically had one of the highest property tax rates in the country; last year, the average resident there paid around 8 percent of their annual income on property taxes — twice the national average.
Miron-Schleider said she also sees clients running into problems getting mortgages. “The biggest stumbling block is the financing,” she said.