Buyers of second homes, the great New York status symbol, may have to reach a little deeper into their pockets if they hope to make a purchase in the area as interest rates rise.
But as sales decrease, prospective buyers of vacation homes have a greater chance of getting their pick of the housing litter, say market observers. Many also believe the likelihood of negotiating a sweet deal will improve if second-home prices drop at a faster rate than primary-home prices.
“As a housing sector it would be at greater risk than primary homes because it’s more disposable,” said Jonathan Miller, CEO and president of Miller Samuel, which specializes in residential real estate appraisal in Manhattan. “You still need your primary residence.”
While the second-home market still constitutes a significant portion of the housing sector, price tags are expected to be slashed at a greater rate than prices for primary homes, said Paul Bishop, manager of research for National Association of Realtors, but “we don’t know how much.”
Prices are still on the rise at a modest clip for some country homes in the New York area. But the Manhattan market overall has fared better than some second home markets.
John Watson, of Brown Harris Stevens’ Bridgehampton office, which serves the vacation and investment market of the East End of Long Island, said that as of early June, the median value of a Southampton home increased marginally, to around $750,000 this year from $735,000 in 2005, a 2 percent rise.
But the South Fork median price overall during the first quarter of this year stood at $740,000, a 6 percent decrease from $785,000 last year, according to Suffolk Research Services.
Sales volume is also waning. “The number of units sold continues to decline,” Watson said. “First this was a function of a lack of inventory, but now sales are slowing slightly and there is an inventory buildup in general, but not in all areas,” he said.
Another Hamptons broker painted a slightly different picture.
Tina Fredericks, president and owner of Tina Fredericks Real Estate, said she saw “a little bit of dropping” in prices in the first few weeks of June. “That’s because that’s how the market is.”
But even in May, you could find “fewer houses around $500,000 or $600,000 than last year,” said Fredericks, whose business covers Montauk to Southampton.
Second-home prices in the up-and-coming Hudson Valley area, which includes Ulster and Orange counties, are down 10 percent, said Win Morrison, the owner of a local real estate company of the same name. More expensive enclaves like Woodstock in Greene County have also seen prices drop. The median price as of May in Woodstock was $340,000, down 5 percent from $357,200 last year, based on local MLS statistics, The Real Deal reported last month.
Though the sales in the region are still going strong, they have slowed down a bit, Morrison said. His firm has approximately 50 buyers per week, Morrison said, compared to 100 at the same time last year.
It wasn’t until recently that the market took a downturn. “It’s been a constant frenzy up until 6 months ago,” John Murphy, general manager at Win Morrison, said. Now, “we’re between a buyer’s and a seller’s market.”
While the Manhattan market has slowed down over much of the past year, it still looks better than some second home markets.
The average Manhattan sales price was $1,300,928 during the first quarter, still up more than 7 percent from the $1,214,379 average sales price during the first quarter of last year, according to Miller Samuel.
Following the big 13 percent drop in the average price between the second and third quarters of last year that heralded the end of the boom, prices have risen, 3.3 percent and 9.6 percent, respectively, in the two quarters since.
Still, things aren’t looking rosy in the months to come.
“Inventory in Manhattan is up,” Miller said. That is in part because “we’ve had a rising momentum of new development.” As of the end of May, overall inventory in Manhattan surged 67 percent from May of last year, said Miller.
Nationwide, a record four of 10 homes sold last year were second homes, said Steve Cook, spokesman for the National Association of Realtors. But that segment is starting to feel the pain. “Much of the slowdown we have seen has occurred this year,” Cook said.
The number of second-home purchases last year was an increase over 2004, when 36 percent of homes sales were for second residences, either investment or vacation homes, according to a profile of second-home buyers by the Realtor group.
The typical vacation-home buyer was a baby boomer — with an average age of 55 — and earned $71,000, while investment-property buyers had a median age of 47 and earned $85,700, the survey found.