The North Shore of Long Island is known as the Gold Coast, but the enclave of stunning waterfront estates has been tarnished by the recent real estate correction.
Sales dropped dramatically over the last three months throughout the high-end market, which is located almost entirely in Nassau County. That dragged down the entire county, causing sales and pricing figures to lag behind neighboring Queens and Suffolk counties.
As a result, sellers have been forced to scale back pricing expectations, say market experts. The downturn has also created a rise in the number of homes for rent, an anomalous situation for Nassau County, where rentals are generally limited.
“Sellers have had to be brought down to reality because they thought it would go on forever,” said Wayne McCann, owner-broker at Harmonious Homes.
In the fourth quarter, for the first time in 18 months, the average sales price dipped below $1 million for a home on the North Shore, according to a report compiled by appraisal firm Miller Samuel. The area is located in Nassau north of the Long Island Expressway and encompasses exclusive enclaves like Old Brookfield and Mill Neck.
Miller Samuel found that average fourth-quarter 2006 sales prices for the area plunged 13.3 percent to $999,885 compared to the year-ago quarter, which hit a record $1,153,718 million. Prices also dropped 9 percent from the third quarter of 2006. The slide from the third to the fourth quarter more than doubled that of Suffolk and was six times larger than the drop in Queens.
The average listing discount, which tracks the drop between the last listing price and the final selling price of a property, climbed to 8.9 percent in the North Shore in the fourth quarter, raising the average listing discount in Nassau County to 6.2 percent. The average discount was 4.7 percent in Queens and 4 percent in Suffolk.
“This is a settling out after a 10-year run,” said McCann. But he sees signs of a rebound. “After a slow fourth quarter, you wouldn’t think there would be many buyers slogging through the snow, but they’re out there,” he said.
McCann is finding some activity in the low-end market. Low-end properties are generally small ranch houses that have survived the teardown trend that is carpeting parts of Long Island with McMansions. These lower-end properties sell for $400,000 in Glen Cove, for example.
Those who find their properties are spending more time on the market are turning to renting. Residential properties on the North Shore spent 109 days on the market in the fourth quarter, up 21 percent over the prior year’s quarter, according to Miller Samuel.
With the downturn in sales, “homeowners are choosing to rent properties to cover their costs and hope that the market will pick up in a couple of years,” said Geri Sonkin, broker associate at RE/MAX Hearthstone.
Sonkin has a particularly gloomy take on the market.
“Right now, it’s definitely a buyer’s market, and it’s probably going to take maybe five to seven years for the cycle to come back.”
But Nassau County’s limited options for builders restrict supply and help push up prices. Zoning is strict, said McCann, especially along the North Shore.
Most of the changes in the housing stock consist of modest improvements that bring home values up accordingly and account for most of the property flips in the area, he said. Generally, it is investors adding onto a ranch to make a colonial, or something similar, he added.
Open land is also scarce, since most of the large estates of the type that inspired “The Great Gatsby” have long been subdivided. Yet the area still contains a number of noteworthy properties.
The average sales price for North Shore properties in the upper 20 percent of the market in the fourth quarter was $2.3 million, according to Miller Samuel. The total number of sales in the fourth quarter was 478, a drop of nearly 20 percent from the quarter before.
High-end homes often sit longer than others. “Generally, to sell unique homes faster, there has to be something other than the house itself, either the size of the property, waterfront access or a unique background, like a famous owner in the past,” said Sonkin.
The situation on the North Shore mirrors that of the luxury market in Queens, Nassau and Suffolk (excluding the North Fork and the Hamptons), which recently took a drubbing. Compared with the previous quarter, the average sales price for a home in the top 10 percent of the Queens, Nassau and Suffolk markets fell almost 6 percent in the fourth quarter to $1.17 million; the number of sales plunged 14.1 percent to 843; and days on the market rose 21.7 percent to 112.
Craig Bell at Century 21 Benjamin Fine Homes & Estates in Woodbury cautions against taking the statistics at face value, in part because the first two months of 2007 have seen a rebound.
“Contrary to the naysayers, things have stabilized considerably,” said Bell. “Is it down from 2005? Yes. But the days of having a dozen people fight over your home are gone, like the Nasdaq at 5000.”
In the segment of the North Shore market in which he specializes, Woodbury and Syosset, 96 homes went into contract during the first quarter of 2006, compared with 144 homes by mid-March in 2007, he said.
“If you price things right, they will sell,” Bell said. “The only thing that can hurt in the long run is the same thing that happened in 1991, when Wall Street laid off a lot of middle managers who lived here and [Northrop] Grumman closed, taking all of its suppliers down with it. It would take something drastic like that to cripple the market here.”