Dan's Papers - August 15, 2008

Wise men say facts and figures don't lie, but numbers can be misleading - and when it comes to the real estate market these days, who can argue? With daily stories about the damage the prime mortgage mess has done to financial markets and the real estate industry, the facts and figures are ugly. In the Hamptons the median price has dropped from $1,100,000 to $970,000. However, one bright spot seems to be on the North Fork of Long Island. The Miller Samuel Real Estate Appraisers claim the North Fork median price for home sales is up 17.8% from the previous quarter, and 13.1% from last year. Town & Country Real Estate specifically mentions Jamesport, where sales (25 homes) in the second quarter this year match up evenly with the 25 of last year, with an actual median price increase from $429,510 (2007) to $445,000 (2008). The Miller Samuel report commissioned by Prudential Douglas Elliman had one bright spot for the Hamptons, noting that the median, although down from the previous year by 11.8%, actually rose from the previous quarter of 2008 by some 9.9%, going from $882,500 to $970,000 (but down from $1,100,000 in 2007).

Looking closely at Town & Country's numbers, sales on the North Fork outside of Jamesport were down in the second quarter of 2008 versus the same period of 2007. Worst is Mattituck, with second-quarter sales down a whopping 63.16% according to Town & Country. That's 57 homes totaling sales of $40,786,000 in 2007, compared to 21 homes sold in 2008 for $13,341,000. In Mattituck, using the Town & Country numbers, going against the trend of the North Fork, the median home price fell 22.3% from $592,000 to $460,000. Bizarrely, in Southold Village, although the second-quarter sales of homes fell 32.5% from 40 (2007) to 27 (2008), the median price actually jumped up 9.35%, going from $535,000 to $585,000. Not so for Orient where second-quarter sales were down 25%, from 32 homes to 24 homes with the median price falling 17.7%, from $527,000 (2007) to $436,500 (2008).

The same sort of activity was reported by Town & Country in Riverhead, where second-quarter sales were down 28.85%, from last year's 57 homes (2007) to 37 homes (2008). In Riverhead the median price dropped only 5.06%, from $360,670 (2007) to 350,000 (2008).

Town & Country figures are not as positive as the Prudential Douglas Elliman-financed Miller Samuel Real Estate Appraisers report on the North Fork, with their median price for homes actually dropping 6.25% from the same second-period number from 2007. What is mind-boggling is that the total sales volume reported by Town & Country in the second quarter of 2008 on the North Fork is down 42.26% from gross sales in 2007, dropping from $128,472,903 to $74,252,875.

So what does this mean? With lower prices on the North Fork there is more activity, and homes are either holding their value or slightly gaining some. On the South Fork, because the big median number is nearly double that of the North Fork, using the Miller Samuel numbers $970,000 to $605,000, and mortgage guidelines are tougher, the charming North Fork is becoming more attractive because it is more affordable. Same-sized homes on same-sized land are less expensive.

One interesting fact revealed in Town & Country's numbers is that the number of sales of $1 million to $1.99 million homes dropped from 17 to six in the second quarter of 2008. That is a drop of 64.71%. There were no sales in the range of $2 million to $3.49 million in the second quarter, whereas there were three in 2007. That's a 100% drop. Yet there was one reported sale in the $3.5 million to $5 million range in the first quarters of both 2007 and 2008.

Prudential's Hamptons regional director reportedly summed things up by saying, "There's plenty of people looking, there's plenty of activity, but they're not serious about buying. It's eerie - there are people out here with lots of money, but they're not spending it."

As Professor Carrington said years ago at the George Washington University Business School concerning down markets, "Never try to catch a falling knife. Let it hit the ground, stop and then safely pick it up."