Real Estate in The Hamptons: ...A repeat of the 1993-94 Market? Hampton's real estate (Suffolk County, East of the Shinnecock Canal) is not the same as many other markets--it is a market driven almost entirely from the stock market and it's related financial businesses. But, ask most homeowners who bought in the early nineties and they all say there is a similarity now that is hard to ignore. 1993-94 was the beginning of a real estate market that launched a historical housing boom....and a record housing crisis in 2008-'09!
THE KEY TO HOMEOWNERSHIP: LOW RATES, LOW PRICES, WLLING INVESTORS!
Similar circumstances to the late '87 stock market crash and the resulting dive in home values gives many in-the-know a sense that we may be on the threshold of a period of escalating home prices--but it is only the threshold!!! If you go back and look, it took a good 3-4 years of slow growth to reach the beginning of the up-swing of prices in '93-'94. So, it is too soon to toot the horn of celebration--we have a long way to go and it may be longer than the 3-4 years that it took in the 90's---speculation has it that there will be a good 10 years between the current housing crash/bottom and the next up swing in home prices.
With interest rates at record lows and prices at the level of 2006, buyers are not apt to walk away from buying--in fact they are apt to step up to the plate and take the plunge, regardless of no longer having the benefit of the $8K price break from the government...the undeniable value of buying NOW is evident to those of us who remember the 1993-1994 market when interest rates were very high. Rates are low as are prices now--we may not see these 4.5%-5% interest rates again for a very long time. In a recent article in the newsletter from Http://Knowledge.wharton.upenn.edu/article.cfm? "Drowning or Hedging? The Risks and Rewards of Owning a Home" shows how the purchase of a home now can be a hedge against volitile prices for shelter in the future. Being priced out of the Hamptons housing market has been a real concern to those who find themselves ready to sell their current home without knowing what they will find on the other side of the sale...the big fear is that they will not be able to afford the upscale neighborhood and will find themselves priced out of the market entirely.
YEAR ROUND VERSUS SUMMER RESIDENTS
"WHO LIVES HERE YEAR ROUND, ANYWAY?" is a question that I have been asked ever since I moved to the Hamptons, from New York City in 1997. It was a frequently asked question because no one I knew from the city had ever contemplated living in the Hamptons on a year round basis.
Most Southamptonites are not year round residents; most are here in the summer and gone elsewhere in the winter. The population that lives here year round has gone through a fundamental change and is now making up a larger percentage of the community as a whole. It was at one time considered "de rigueur" to live in the Hamptons off season-that has changed as the population ages and as the area becomes an obvious place for retirement. New York City is the source of these retirees and since they still want to be near their families, the year round population in the Hamptons has expanded. Because of the lack of jobs for mid level executives the population growth has come primarily from young families and retirees. Right after the events of 9/11 we saw a population bubble of young families as they made the Hamptons their year round domicile. Demographics are difficult to come by, since the fluctuation in population changes from one season to the next; but on average, we have seen a year round population level rise SIGNIFICANTLY since 2001.
There are very vague numbers available right now because it is hard to determine just how many people have moved into their existing second homes on a year round basis. So an educated guess of how many people are now living in the Hamptons year round would only be verifiable through a carefully researched census. That figure should be available after the 2010 census.
SALES VERSUS RENTALS
Historically, when sales are strong here, rentals take a nose-dive. Not so this year; 2010 had a healthy increase in sales in Q1 while rentals came in very early and very strong....then came to a complete standstill, as sales drifted to a slower pace as well. Consistant with the sales market of the early 90's, rentals were seeing the first real spurt of a healthy revival and rental prices soared as homeowners caught on to the willingness of the city dweller to pay a premium for a stylish, clean and roomy home to spend summer weekends.....
Summer rentals are a source of income for most homeowners in the Hamptons.
A good 70 to 80% of the private homes in the Hamptons are now available for rent for a period of time during the Summer season. This number has increased this year as owners are finding themselves in a bit of a pinch financially and renting their homes out for some income has become very tempting to those who have the stomach for it. So for the foreseeable future we see the following influences on the rental segment of the housing market here in the Hamptons:
- The number of houses available for rent has increased substantially.
- The number of people looking to rent has decreased due to lack of disposable income.
- Shorter-term rentals are the order of the day as renters look for a less expensive way to enjoy their summer months.
- High end rentals ($150,000 and up) were gone months ago and were rented within 10% of the asking price.
- The rental market has now slowed to a crawl and people who are looking to rent for the balance of the season--through September 7th --are making offers at the level of 1/2 the asking price...or even less.
- During this time, people looking to buy have decided to rent a place; they want to be here in the event the sales prices start to decline again...this is an indication that a tentative stabilization is in question by many potential buyers.
The homes that are sitting and waiting for tenants are the tired, worn, and unkempt houses. These are the homes that have been rented every season without putting the pre-requizite 10% back into them to keep them maintained for future seasons. This year there are a record number of these houses and along with the unsettled feeling about the economy and other critical concerns of the day, these are definitive contributions to the malaise that has set in on the rental market in the Hamptons.
2010 will likely end up to be a much better year in real estate in the Hamptons than in 2009. With luck, the rental and the sales market will have made a turn around that can be measured by the end of October 2010. In many ways, we are adjusting to a new economy as well as a new way of life in the Hamptons; many have said that the real estate market would never take the downturn that it took in the fall of 2008.
Now that we have seen it with our own eyes, we can go forward with a clearer understanding of just how fragile the housing market can be, especially in the afterglow of a major housing market bubble!
**ALL INFORMATION AND CONTENT IN THIS BLOG IS ORIGINAL TO PAULA I. HATHAWAY
Paula I. Hathaway, Senior Vice President, Douglas Elliman Real Estate
Southamtpon Village Real Estate Specialist since 1995; Also Specializes in North Sea, Noyac, Water Mill and Bridgehampton, New York
Diamond , Gold and Chairman's Circle Awards; Top Producer since 2005
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