Dan's Papers - January 30, 2009 - Estate Of Mind - Living In The Hamptons, For What It's Worth

The old retired sailor looked at me and said, "Everyone is telling me my home is worth less, but to me as I get older it's worth more. It's my home and means more every year I live here."

One really doesn't have to look at the final sales numbers to know that overall 2008 wasn't a great year for the real estate industry on the East End of Long Island, but I did.Looking at Suffolk Research's numbers for Suffolk County in 2008 show a trend in total home sales that started in calendar year 2006, with 3,148 units sold. That cascaded down in 2008, to just 1,973 units sold. Amazingly, in 2006 the median home price for the entire East End was $660,000. Although it jumped to $740K in 2007, it dropped down again in 2008, to $650K.

Of the five towns of Suffolk County, statistics for East Hampton Town were most notable: Volume was down to only 396 units for the entire year. In East Hampton Town in 2006, 645 units were sold; in 2007 it was 648. According to Suffolk Research, that was a drop of 46.5% in dollar sales ($1.256 billion to 2008's $672 millon).

The greatest reduction, however, was on Shelter Island, where the dollar sales dropped 49.3% compared to 2007. The Town of Southampton saw its total unit sales drop from 1,329 in 2007 to 882 in 2008. Total dollar sales fell 32.9% from 2007. Riverhead sales dollar drop was the most drastic of the five towns, at 16.2% with 327 unit sales in 2008 versus 387 in 2007. Southold numbers came in with dollar sales down 18% versus 2008. Unit sales for 2008 were 319, down from 420 in 2007. Actually, according to the data, 2008 total sales dollars in Suffolk County were $2.69 billion versus $4.182 billion in 2007.

What does this all mean? Looking on the positive side, with substantial downward movement in dollar sales, the actual home value has held up well (compared to the Dow), with the median prices county-wide down a mere average of $10,000 per home. None the less, the concept that buying and selling homes is as easy as mouse clicks on a laptop has been shattered. Now homes stay on the market around nine months in Suffolk County when they are priced correctly.

Martin Mayer, the noted Brookings Institute Scholar, said, "Confidence and credibility" are two ingredients needed for recovery not only in real estate but for the country's overall economy. Every year couples get married, people have children, and working couples retire. All of them need new housing, economic downturn or not. What they will be persuaded to pay for their housing needs will be based on how they view their future ability to pay and make money. At the moment their confidence on the whole is not as it is in a boom period.

Town & Country Real Estate is reporting an actual increase in the median price of homes in some North Fork towns compared to the fourth quarter '07. Their numbers seem to predict a movement back to normalcy, proof that the affordability of homes with lower median prices are attracting buyers. The median prices, according Suffolk Research, list Riverhead at $410K and Southold at $500K. Compare that to East Hampton's median home price at $995K or Southampton's of $799.9K. Where will a first time buyer or a retiree, faced with uncertain money issues, look to buy a home? The South Fork has a sizzle factor, but at the moment the economy just isn't sizzling.

Town & Country, in its fourth quarter reports, emphasizes the performance of homes versus Wall Street. But the reality is that it was the success of Wall Street that created the capital that made the south fork market run so wildly. It's as simple as this: the fewer multi-million dollar Wall Street bonuses, the fewer multi-million dollar East End sales. To point at a better performance of real estate verses Wall Street is a double edged sword.

Brokers at Corcoran, Brown Harris Stevens, Prudential Douglas Elliman, Town & Country, Hampton Realty Group and others stand poised to turn 2009 into a miracle year. U.S. Airways flight 1549 showed that an experienced, well trained pilot and crew can navigate through difficulties safely. Many real estate agencies on the East End reflect such a crew. With low expectations, a strong year may emerge.

The magic of the ocean, the beauty of the towns haven't been devalued. Those lucky enough to live on the East End know the value their homes, as they assure an exquisite quality of life.