Dan's Papers - November 7, 2008

For the last few months, the housing crisis and the national sub-prime mortgage crisis were interwoven and seemed to be a two-headed monster. However, slowly the two situations are revealing their own identities - meaning one may have to be solved before the other. Data shows that home sales are up perhaps as much as 70% nationwide versus a year ago, perhaps due to foreclosure deals and lowered prices. This increase brings the country to the sales level of 13 months ago - but not the Hamptons. Sales figures for the third quarter released by Town & Country Real Estate shows a detailed downward spiral for sales.

For example, in Sag Harbor Village and surrounding area, (including North Haven and Noyac) last year there were 45 sales compared to this year's 20. East Hampton Village, which had 17 sales in 2007, had all of four in the same quarter of 2008. Town & Country's numbers show declines of 80% in Bridgehampton - from 50 sales down to just 10. Shelter Island? Down 63.64%, going from 22 sales to 8. An overview of the downward-pointing percentages shows decline ranges of 80% (Bridgehampton) to 53.4% in the best performing zone: Westhampton. The overall percentage drop for all the Hamptons is 62%. Totals for the third quarter 2008 were listed at $299.8 million, compared to 2007's $926.9 million. Compared to 472 in the third quarter of last year, only 179 homes were sold in the Hamptons (which includes sales from Westhampton to Montauk and Shelter Island). The median price in all the Hamptons dropped 22% - from $1,102,500 to $850,000 with the largest median price percentage decline in East Hampton Village and Bridgehampton - both right around 31%. Dollar wise Bridgehampton median decline is over $1 million; East Hampton Village - $900,000.

Then there's Montauk, where the numbers were down but not dramatically. For example the median price fell in the third quarter only 8.6%, from $999K to $912.5K in '08. Although actual sales dropped to only 12 (from 35 in 2007) the prices did not fall that much. It may be noted that in the third quarter of '08, two homes traded for under $500,000 in Montauk, whereas during the same quarter in 2007 there were no sales at that price point.

In a conversation with real estate veteran Joe Kazickas at his new office on 251 Pantigo Lane, he showed that the national trend is not yet the local trend - which he called still "ugly." Kazickas, who was noted for landing the over $15 million listings and sales at a previous firm, has started up a new firm, Rosehip Partners, thus stripping away the millions of dollars of overhead other firms carry due to mergers. Kazickas does not see recovery coming as soon as post election. But he does foresee a big rental season where big money people will wait out the crisis by renting, thus preserving the lion's share of capital for owning an estate. According to Kazickas' computer, some of the sales in town were estate sales, as property was passed from one family member to another. Bottom line is that the figures of new sales were actually worse than they appeared. He stressed the plusses of owning or renting property in the Hamptons, but does not see recovery to the way things were "for years."

The third quarter data, showing the huge declines, must take into account that the 2007 third quarter was also down double digits compared to 2006. So what does all this mean? On the positive side, homes selling in the Hamptons still command big prices. The median in Bridgehampton of over $3 million is an example. It's tougher to be a real estate agent these days, with the number of sales down by more than half. The large real estate companies have to rethink their business models to compete in this environment and service the buyer along with the seller on the highest level is clear.

Kazickas, a noted golfer and wise long time real estate agent with a successful proven record of sales, remains optimistic long term. But for the short term, compared to the national data, he flashed his big smile, looked me in the eye and said, "It's not happening here right now. But when it does, I'll be here."

Leaving his new office, I realized that a seasoned real estate veteran opening his own firm in this environment has to feel that good things will happen in the future.