Home sales activity ebbed on the East End of Long Island in 2006, with the very high-end the only segment escaping the cooling trends affecting Manhattan as well.
This sales dip has boosted rentals in the Hamptons and on the North Fork, and increased interest in previously overlooked or underrated towns such as Flanders, between Riverhead and Hampton Bays, and North Haven, between Sag Harbor and Shelter Island. Brokers, in fact, talk of this summer being one of the strongest East End rental seasons in years.
The Real Deal spoke at the end of August to brokers who are wrapping up their summer season.
Stuart Epstein
owner, Devlin-McNiff Real Estate
Q. How did the East End market fare this summer?
A. It’s hard to say. The year to date is, I would say, down 20 to 25 percent in terms of sales transactions.
People have backed off from buying and will rent instead, but sales is not dead. It could be described as normal. We could be looking at a five-year cycle of normal and we’ll adjust.
Q. What part of the rental market fared best this summer?
A. All segments; we experienced a universally solid rental season. They move in opposition to sales.
Q. Any particular towns surprisingly active or inactive compared to years past for rentals?
A. Well, a rising tide hits all boats. Conversely, they all sink together too. It’s not like Amagansett is doing better than anywhere else. So many people who come out here aren’t even aware of what town they are in.
Q. What sort of notable rental prices were you seeing?
A. The rental market here can go as high as you could possibly imagine, from $700,000 to $900,000 a season, down to $8,000. I didn’t do any $1 million rentals, but maybe somebody did.
Q. What part of the sales market has fared best so far in 2006?
A. The sales market that’s healthy is the super, super high-end and, to some extent, the entry level. It’s everything in between, which is a huge swath, which is where the weakness is.
Q. What is the most underrated area as far as there being an upside in prices?
A. Essentially, there is no area on the market that is underrated, unless you are someone who wants to be a pioneer and look in Flanders and Riverhead.
For bargain-hunting there is nothing on the South Fork, and probably the North Fork, too, that hasn’t been discovered.
Judi Desiderio
president, Town & Country Real Estate
Q. How did the overall East End market fare this summer?
A. In sales, the first half of summer was quiet. In August, the activity level has picked up.
There are really two big selling seasons out here: fall, which starts in mid-August, and spring, which starts in mid-February. Fall is grander; there is ordinarily more business in the fall.
Right now, buyers are a bit more tenuous; they are more worried about the overall economy, price of oil and terrorist attacks; we are a luxury item out here. This is like buying a bigger boat and [buyers] are thinking “do we have to do it?”
Q. What part of the rental market fared best this summer? What part fared worst?
A. It has been one of the best rentals years in the last four to five years. Ninety-five percent of the rentals were taken. In the North Fork, it was a little lower.
Q. What sort of notable rentals prices were you seeing?
A. The bargains only happen at the last minute, when you see a $60,000 rental going for $40,000 to $45,000.
For a high-end rental of a $10 to $12 million dollar house, paying $250,000 from Memorial Day to Labor Day is a bargain. It’s nothing when you look at what the carrying costs to actually own the house would be.
Q. What part of the sales market has fared best so far in 2006?
A. The high-end is strongly in the black. There are two high-end price categories, $3.5 to $4.999 million and then $5 million and up. Those two categories did very well.
Q. What part of the sales market has fared worst?
A. The $2 to $3.5 million [bracket] north of the highway [Route 27] fared worst simply because that’s the middle of the market. They get hit more from a stock market swing; the economy swings in general hit the middle market harder.
Q. What is the most overrated neighborhood?
A. I say we are still a bargain. I have traveled a lot. When you go out to California, you are sitting on a postage stamp.
Q. What group of buyers is the most active right now in the overall market?
A. They are generally in their 40s, married with children and looking toward the future. Back in the ’80s it was more of the 20- and 30-year-olds.
Q. Where is the most building and new development activity happening?
A. In the 26 years I’ve been in the business, I have never seen so many new homes on spec [built on a speculative basis without particular buyers lined up in advance] from $10 to $20 million. Unfortunately, the municipalities make sure you can’t buy a chunk of land like 10 to 15 years ago.
Q. What sort of notable sales deals have you seen recently that typify where the market is at?
A. The number of $20 million deals being done this year surprised me. That is newsworthy, trend-wise.
Diane Saatchi
senior vice president, the Corcoran Group
Q. How did the overall East End market fare this summer?
A. It’s been a very strong rental season, and sales were also strong in most segments, with a “but.”
The “but” is a perception that the inventory, mostly mid-market, is outpacing the even healthy demand, so it appears as if there is a slowdown, or shift, from a seller’s market.
Q. What part of the rental market fared best this summer? What part fared worst?
A. We do not keep data on rentals, so my response is anecdotal. Like most years, the best-presented and best-priced rentals go early. This year got off to an early start, with many of the prime rentals signed in early January. Things were then pretty quiet and kicked up again late spring. There was a shortage of very luxurious, price-no-object rentals.
As this year followed a few slow rental years, many owners were prepared with fresher and sanely priced homes.
Q. What segments were most active for rentals?
A. A trend toward shorter rentals seems to be continuing. In the past, most rentals were Memorial to Labor Day; now many are July and August or just one month. And while the summer rental is getting shorter, there is an ever-increasing demand for year-round rentals.
Q. What is the most underrated area?
A. Historically, south of the highway was the place to be. One can get a whole lot more house and property for the money north of the highway in all the Hamptons. North was clearly underrated but has recently become socially OK as celebrities have moved north. With loads of large estates north, we anticipate an upside.
The fastest-rising prices have been in Amagansett, which still has some upside, but it’s hard to find, as it has been picked over. Probably the next spot for today’s pioneers is Flanders, between Riverhead and Hampton Bays.
Q. Where is the most building and new development activity happening?
A. The majority of new building is north of the highway because the available land is there. The inventory of new homes is great.
Q. What sort of notable sales deals have you seen recently?
A. Sadly, for those buyers who have been waiting for a downturn, I have not seen any exciting discounts; prices are holding within a small margin of asking.
One recently reported deal is of a spec house; it was reported in the New York Times a few days ago [in late August]: a seven-bed, seven-bath on 10.3 acres with pool and pond was going for $19.5 million. It is not a record sale but it shows what wealthy buyers are up to.
Ginger Bittner Andrews
owner, First Hampton Realty
Q. How did the overall East End market fare this summer?
A. I feel as though the rental market was great, up from last year. The Dune Road and waterfront properties were totally rented. The really expensive rentals on the ocean or bay — most of them are rented by March.
Q. What part of the rental market fared worst?
A. The homes of people who rented in the past and didn’t update their furnishings or put in central a/c, a pool or make the house visually nicer didn’t do as well. People who stylized or staged the house got better tenants because they look for an updated home.
Q. What sort of notable rental prices were you seeing?
A. We had one on the bay in Quogue that rented for the season at $200,000 and one for the month of August on the ocean on Dune Road in Westhampton Beach that was $140,000. Some rented for $125,000 per month in Quogue and Westhampton Beach.
Q. Were there any group of renters that were surprisingly active or inactive compared to years past?
A. In Westhampton Beach, Quogue and Remsenburg there definitely are more family renters than before. We don’t really have the young singles getting together and renting like before.
Q. What group of sellers is the most active right now in the overall market?
A. Sellers over 50 and also people who have small houses and want to trade up to water or something like that. Right now, there are a lot of people who have changed things in their lives. Older sellers are going to condos or moving out of the area. A lot of people have a condo in Florida already and this was their primary home, not a second home.
Q. What sort of notable sales deals have you seen recently?
A. Anywhere in Quogue; we had prices there being listed at $10 million and above because we just don’t have any more waterfront. In 2005 and earlier in 2006, they were selling in the $6.9 to $8 million range. The best bargains right now are between $900,000 and $1.6 million.
Paul Brennan
Hamptons regional manager, Prudential Douglas Elliman
Q. How did the overall East End market fare this summer?
A. Rentals were up but sales were down.
Q. What part of the rental market fared best this summer?
A. Across the board, rentals have picked up maybe 20 to 25 percent to the year prior.
Q. What part of the sales market has fared best so far in 2006?
A. The over $10 million dollar market from Southampton to East Hampton.
Q. What part of the sales market has fared worst?
A. The $2 to $5 million properties in my area, across the board. The market I know best is from Southampton to East Hampton. The other markets are different whether they are Montauk or Sag Harbor. In the analogous price bracket, you get the same result in the lower- to mid-price range.
Q. What is the most underrated area?
A. The North Sea [area of Southampton] in the $1 to $2 million range.
Q. What group of buyers is the most active right now in the overall market?
A. Wall Street types and in the price range of over $5 million.
Now is the time to buy if you look at how the market has performed over the past 25 years — it’s important to note that there have been plateaus. If you have the chutzpah to buy during the plateaus, in another two years, you’ll look like a genius.
Q. Where are there the greatest opportunities for new development on the East End?
A. Montauk and Amagansett; the lower price range is from $1 to $3 million.
Q. How has the East End market fared in relation to the Manhattan market or the suburbs?
A. It’s apples and oranges; those are primary markets, ours is a luxury market, although there is a relationship. If Manhattan is down, then the East End is down.
Q. What sort of notable sales deals have you seen recently?
A. There is one in Easthampton that will take place in September for over $100 million, probably the largest ever and probably the best piece of property out here.
Peter Hallock
senior managing director, the Corcoran Group
Q. How did the rental market fare this summer?
A. I have never seen an August as busy or as crowded.
Q. Were there any group of renters that were surprisingly active or inactive compared to years past?
A. We had more Europeans this year than usual.
Q. What sort of notable rental prices were you seeing?
A. We did a rental of a beautiful new home in Water Mill that was not on the water. It was an estate property in excess of $500,000 for the season, which is record-breaking. For the home not be on the ocean, pond or bay, that’s a particularly high price. [Editor’s note: The deal was brokered by Allan M. Schneider & Associates before it was purchased last month by NRT, parent company of Corcoran.]
Q. What is the most underrated area as far as there being an upside in prices?
A. I still think it’s catching up on the north side of the Hamptons. The Peconic Bay area has a bay five miles across on the north side with beautiful sunset views and pristine wetlands. Although it’s increasing in price, I think it’s underrated.
Q. What is the most overrated neighborhood as far as there being an upside in prices?
A. I don’t think that exists in the Hamptons. Just when you think you’ve hit a record high someone breaks that record when something spectacular comes on the market. Who is to say it’s too much?
Q. What group of sellers is the most active right now in the overall market?
A. Some people are local, reaching retirement age and finding that the house they’ve lived in year-round is worth so much that they are cashing out. Some are trading up or down.
Tina Fredericks
owner, Tina S. Fredericks Realty
Q. How did the overall East End market fare this summer?
A. Prices are going up; so much is on the market that some have come down a little bit to be competitive. We didn’t have too many sales this summer.
Q. What part of the rental market fared best this summer? What part fared worst?
A. We did best in the high-end. My feeling is people are looking for much smaller increments of time than they used to. It used to be Memorial Day to Labor Day. One-month rentals are popular along with smaller amounts of time. This morning, I got a call from somebody looking for a house for the weekend.
Q. Any particular towns surprisingly active or inactive compared to years past for rentals?
A. The inclination is to be closer to New York City, so Southampton, Water Mill and Sagaponack are always very popular. The traffic has been unbelievable and people have been trying to avoid it as much as possible, although I think Montauk has seen a very busy season because it is a little farther away and prices may be a little bit better.
Q. What is the most underrated area as far as there being an upside in prices?
A. Certainly if you are counting the North Fork, I would say that’s where the bargains are. As a whole, it has a long way to go compared to the South Fork, but I don’t do much business on the North Fork. We’ve also been getting a lot of requests for places to tear down or redo totally because there’s so little land left.
Q. How has the East End market fared in relation to the Manhattan market or the suburbs?
A. I have no idea. I have a pied-a-terre in Tudor City that I would like to sell, and my doorman tells me the market is soft.
Michael Daly
principal broker, True North Realty
Q. How did the overall East End market fare this summer?
A. Overall, it’s been a good market; however, many of us have been spoiled by the great market of the past few years. There were still houses that went unrented this season, but, as a rule, it was very good.
Q. What part of the rental market fared best this summer?
A. I would say that people from the financial markets were especially active in terms of rentals with the reportedly good bonus season. I think that group spent on rentals a little more freely than they had in recent years.
Interestingly enough, the increase in rental activity this year has supported the home values out here because a good rental market results in cash flow for these homeowners. If people thought that by renting they were going to soften the sales market, that hasn’t necessarily happened.
Q. What part fared worst?
A. Those that fared worst were the homes that were not special and were overpriced to begin with. Over the last few years, many people have bought homes with the intent of renting them. It’s natural to have an inflated view of the value of their home as a rental.
Q. What part of the sales market has fared best so far in 2006?
A. The best is under $2 million and over $7 million.
It seems like the super-premium home from $10 to $20 million is desirable but there’s very little inventory. At the moment there is no inventory with water view homes between $8 to $16 million on the East End.
I think we have a real estate agent bubble. Not a real estate bubble.
Q. What is the most underrated area as far as there being an upside in prices?
A. North Haven, between Sag Harbor and Shelter Island, is one of the most desirable yet underrated. The North Fork is not undervalued at all. It has risen proportionately in the last several years.
Some said a while ago that Springs was the best value in the Hamptons and now it isn’t any longer because the value and selling prices jumped up quickly. The next undiscovered is Noyack, which is on the bay between Southampton and Sag Harbor on the north side of the South Fork.
Q. What sort of notable sales deals have you seen recently?
A. There has been a great deal of commercial activity in Sag Harbor with over $40 million in commercial property purchased this year with the intention of residential and commercial development. The Bulova watch factory is to be developed into a mixed-use property as well as waterfront property. The owner is now before the village board seeking approval for condo development.