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The real estate market on the East End is good or bad, improving or tanking, depending on whom you talk to and what you read. However, the numbers for the second quarter of 2009 are higher than they were for the first quarter of this year. (Property courtesy of Susan Breitenbach, The Corcoran Group)

Southampton - Sales are down, prices are lower and inventory is up. That much is certain as real estate agents enter the second half of the year analyzing market data gathered over the last six months. The big question, have we seen the bottom yet, remains unanswered.

The real estate market on the East End is good or bad, improving or tanking, depending on whom you talk to and what you read. Despite these mixed messages, the bottom line is clear amid market reports cluttered with graphs and discussions of quintiles that are often obtuse and difficult to understand -- the numbers for the first half of 2009 are lower than they were in 2008 which means the market is down.

However, the numbers for the second quarter of 2009 are higher than they were for the first quarter of this year. This indicates an up turn and a heralds a shift in cautious expectation.

"The number of sales has increased in the last three months along with the median price and total sales volume. That's very big news," George Simpson of Suffolk Profiles declared. “The market is coming back." Simpson has been monitoring East End real estate sales for years. According to Simpson, the numbers to watch are the figures for this year - not the numbers from last year.

“Agents should not be doing a year over year analysis," Simpson said. “They should be looking at this year and watching the quarterly sales increases. Statistically we can expect the third quarter to be better than the second quarter."

That is the recovery theory that agents and sellers are happy to hear. But there is no denying the year over year analysis indicating the market this year is not good compared to last year. In fact, the numbers indicate the market on the East End has been declining steadily since 2007.

CPF Indicator

A clear cut indicator of the drop in sales is the corresponding drop in revenues collected for the Community Preservation Fund, referred to commonly as the CPF. The CPF derives its revenues for land preservation by collecting a two percent transfer tax at the closing table each time a property changes hands in any of the five East End towns.

Southampton Town has emerged as the largest collector of these funds over the years since the fund was established in 1998. In 2007, Southampton's fund topped out at $53.5 million. This number decreased to $32.97 million in 2008 according to figures released by New York State Assemblyman Fred Thiele's office this month. This year the town collected $8.35 million for the first half of 2009.

Real estate agents across the region do not need a report to tell them which way the wind is blowing or how the market is playing out as they search for customers on a daily basis while coping with their anxious clients. It takes longer to sell a house this year than it did last year. Sagaponack property courtesy of Sotheby's International

At this rate, Southampton Town officials hope to end the year with an estimated $16 million in revenue if sales continue at the current rate. This number could increase if there is an increase in sales activity, however there is an established pattern of decline which may indicate next year's totals could be half of the year end 2009 revenues. Statistically this number can be expected to decrease in much the same way Simpson predicts his numbers will increase in the third quarter.

Prudential Douglas Elliman and the Corcoran Group, two corporate real estate firms with offices from Montauk to Manhattan, released their second quarter reports this month indicating a severe decline in sales as well as selling prices for the first half of 2009 compared to totals for the same time in 2008.

Corcoran reports a total sales volume of $396 million for the first half of 2009. The figure is a startling contrast to the firm's 2008 sales volume total of $949 million. These totals are based onCorcoran's sales on both the North and South Forks. The North Fork total is based on sales conducted from Aquebogue to Orient. The South Fork data tallies sales from Remsenburg to Montauk.

While these numbers are discouraging, the Corcoran Group has found a way to spin it by encouraging buyers to take the plunge noting the growing inventory and falling prices make it an ideal time to buy a home on the East End.

Phones Still Not Ringing

Real estate agents across the region do not need a report to tell them which way the wind is blowing or how the market is playing out as they search for customers on a daily basis while coping with their anxious clients. It takes longer to sell a house this year than it did last year. Buyers are scarce. The phones aren't ringing. When a house sells, it often sells for considerably less than the owner's original listing price. Inventory on the North Fork is moving slowly.

Waterfront homes have remained on the market for months, if not years, as sellers hold their price or make minor price reductions. A few years ago when the market was “hot" this type of listing would be sold within 30 days. Bidding wars and back-up offers were common. Now they are few and far between.

Agents on the North Fork point to a French Chateau style home on Long Island Sound in Jamesport as a case in point. The house, first listed with a NYC broker, went on the market for $3.5 million in 2006. The house has not sold. The property is now listed for sale at $1.665 million, a figure that represents more than a 50 percent price reduction. The first time homebuyers said to be favored by this market have not materialized despite the lure of low interest rates and available financing.

“If you are going to comment on the market you have to take a historical perspective," Richard Stauffer, of the Hamptons North Fork Realtors Association (HANFRA) said.

North Fork broker John Nickles, of Lewis and Nickles Real Estate LLC, reported market activity for second homes in the $400,000 range. “It helps if the house is close to the water," Nickles said, “and has beach rights. Then it will sell."

Nickles has been in the real estate business over 40 years and serves as the president of the Hamptons North Fork Realtors Association (HANFRA). “First hand, in the trenches," Nickles notes, “we have a seen an increase in sales in the last seven weeks." The big money is sitting on their hands according to Nickles. His observation is backed up by the number of choice bay front properties that have not sold this year.

Real estate signs on houses along the roadways of the Hamptons are as plentiful as the deer that dart across them. Even luxury housing often traded among the recession proof segment of the population is moving slowly. In some cases homeowners have dropped their prices as much as $10 million as they wait for a buyer to come along. Sometimes these dramatic price reductions are the result of a realty check after a seller has failed to attract any interest in a property that has gone on the market for what agents refer to as “an ambitious price."  

This strategy worked in a boom market when demand was high and supply was limited. Buyers were psychologically prepared to overpay rather than lose a house in the Hamptons in those robust markets that existed a scant four years ago. Now high-end buyers are offering brokers fifty cents on the dollar for houses in their inventory.

Corcoran's report indicates a 16 percent drop in the average price of homes in Sagaponack, a locale that has been cited by Forbes magazine as one of the wealthiest zip codes in America. In 2008, the average home price in Sagaponack was $4.144 million. This year the number has dropped to $3.439 million. The median price dropped from $2.65 million to $2.2 million, or 17 percent, in one year.

The decline in average as well as median prices is across the board, with a few blips on the chart where these values have increased slightly on both the North and South Forks.

Prudential Douglas Elliman's report take's its own stance on the drastic price reductions describing the gap between the listing price and the contract price as a “listing discount." While that may be a nicer way of telling a seller to take a hit and make a deal, the fact remains, houses, condos and vacant land on both the North and South Fork are selling for considerably less than they did last year, and far less than they did two years ago giving buyers good reason to wait it out.

An Historical Perspective

“If you are going to comment on the market you have to take a historical perspective," Richard Stauffer, of the Hamptons North Fork Realtors Association (HANFRA) said. Independent owner brokers like Susan Von Freddie of Village Real Estate in Hampton Bays have that perspective. “I've been here 37 years," Von Freddie said. “We are all in the same boat, whether we are owners, brokers or corporate firms. Things are slow. We are doing a few deals but they are not jumping out at you. It's not like the old days," she said repeating the familiar refrain that punctuates most real estate agents' conversations these days. Von Freddie noted an increase in the number of year-round rentals but reported a lackluster summer rental season dominated by weekly rentals rather than seasonal leases.

Out in Montauk, 40-year veteran John Keeshan, of Keeshan Real Estate, reported making six sales for the first half of the year. Keeshan believes in Montauk from the ground up noting the large amount of preserved land surrounding the beach community restricts development, making the location on the tip of the South Fork one of the most desirable locations on the East End. “I think the market has hit the bottom," Keeshan said, encouraged by his sales performance. “Things start to happen once a few people get off the sidelines," he said. “Montauk is a hot ticket."

Keeshan has attracted loyal customers and clients by adhering to a simple business philosophy. “If you do the right thing, and are fair and honest, people will come back to you." This quintessential hometown broker happily foregoes the trappings of corporate real estate and pokes fun at their presence along the shoreline.

“We have a lot of slogans we use in our ads," he said gladly sharing his witty sayings. “For instance, we have one that says, “There are still more lobsters than people out here." Another proudly states Montauk is the place “where fishnets aren't stockings." The one that always gets a laugh, especially from the real estate community, proclaims “our sharks are in the water."

Keeshan is proud of the fact that he does business from one office describing his location as the “worldwide headquarters" for his company. “Most of the business we do is on a handshake," Keeshan said. “There will always be a market out here. It's all about supply and demand. The demand is starting up again and the supply will go down." Keeshan predicts a market turn around by the spring of 2010. “By then," he said, “half of the inventory will be gone."

VonFreddie sighted the unprecedented rate of appreciation in real estate prices on the East Endover the last decade as a major factor in the current downturn. “It just went up and up, until prices got too high," Von Freddie said. “People want $700,000 for a ranch, and it is not happening anymore."

Agents hope the market will self correct to the point where buyers return with cash and confidence. “No one wants to overpay," Simpson said. He has been trying to sell his house for the last three years with no takers. “I think buyers are very naïve about bargaining," Simpson said, commenting on the lack of offers on his property. Statistically speaking, he can expect a change when the numbers jump at the end of the third quarter.