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Feb 10, 2009 10:06 AMPublication: The East Hampton Press & The Southampton Press

Real estate market stumbles into 2009

Feb 10, 2009 10:06 AM

A year ago, recession warnings were on everyone’s lips, the mortgage crisis was clotheslining the national real estate market, and there was not the slightest inkling that the government was thinking about stepping in to help.

In the Hamptons, the talk was not of looming disaster but of how the high end of the real estate market was carrying onward and upward, dragging the median price of East End homes up despite slightly fewer sales, and how the local market, as a whole, seemed to be muddling through the tough times and even showing signs of a possible upswing.

Then September happened. The stock market’s nosedive, viral international economic turmoil, the Lehman Brothers collapse and seemingly endless rounds of layoffs since have reduced the torrent of money that had been deluging the East End for years to a trickle. By the end of 2008, almost every region of the East End and every sector of the market had seen precipitous drops, in both volume of sales and dollars that changed hands through real estate dealings.

And as the real estate season gets swinging for 2009 with the coming holiday weekend, there is little question that the housing market on the East End has finally been knocked off its high horse.

But for how long?

There are signs of life. With the vast supplies of wealth in the metropolitan area, even in tough times there are people with a lot of money around. Some professions, like doctors and lawyers, have not been hit by the financial tumult and that $18 billion in Wall Street bonuses, even if it is the last of the booty for a while, is going to land somewhere.

Smelling Blood

With most second-home and investment markets in collapse and prices around the country withered, the sharks are smelling blood in the water. Bargain hunters who still have liquid assets are on the prowl in the Hamptons.

“It’s not like everyone is completely bankrupt. There are people looking to buy,” said Stuart Epstein, owner of Devlin McNiff in East Hampton. “Our office is busy showing properties. There is still a lot of hesitation when it comes to making offers—things tend to stall out—but it’s the first step toward something happening.”

Nearly every broker, agent or market watcher interviewed in the last week said that they or their colleagues have been increasingly busy in recent weeks showing houses—not closing deals, but showing houses.

The hitch is still in the asking prices. By most accounts, the owners of the inventory—houses for sale—have still not lowered their asking prices to the point that the bargain hunters are jumping to close deals.

After years of atmospheric market growth, expectations among sellers are for high price points and big profits, even as the number of sales has fallen off. Most brokers say that only those who are truly under the gun to sell have lowered their prices. Others are standing firm.

“There’s a standoff right now between sellers who want to believe that their houses are worth what they were at the height of the market, and buyers who don’t want to pay those prices,” said Jay Flagg, vice president and managing broker of Prudential Douglas Elliman’s Southampton office. “The buyers right now are bottom fishers, vultures coming in with very lowball offers. They both have to come toward each other somewhat and when they do, we’ll see things start selling again.”

“I think sellers are finally beginning to realize that if they want to sell their house, they need to make a drastic price reduction,” said Morley Quatroche, owner of the Morley Agency in Southampton. “If they do that, there are buyers looking. My wife has had a listing for a week at $2.5 million and she had two showings the first day and four or five more this weekend.”

Growing Inventory

Rick Hoffman, regional vice president for the Corcoran Group, said the inventory of houses for sale on the East End is higher than it has ever been and is increasing every month.

In 2008, the inventory of houses for sale in the Hamptons rose 11 percent, according to the OREX shared listings system. The total inventory rose by more than 1 percent in January alone. Such a trend demands that prices will come down.

“It used to be location—the adage of what’s the most important thing in real estate—now it’s value,” Mr. Hoffman said. “It’s the psyche of the buyer. They read about the market and they think prices should be way down. It’s the psyche of the buyers in everything now: Bergdorf’s, car dealerships, everything. They want a good deal.”

History dictates that in a market that is due for a correction, good deals should be on the horizon. Over long periods of time, 20 years or more, house prices on the East End have increased an average of about 10 percent a year, according to market watchers. From 2003 through 2005, the median prices in East Hampton and Southampton towns grew 17 to 25 percent per year. The prices leveled off in 2006, growing by only 4 to 8 percent, before jumping again in 2007 by about 20 percent.

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I'm stunned that a real estate company dependent on the willingness of buyers to actually BUY is calling smart consumers "vultures and bottom feeders."
At the same time, this representative of a major real estate company is criticizing sellers for being unrealistic.
If this is an attempt to garner sellers and buyers, and if you succeed, the Hamptons really is a very, very strange place indeed.
By LM (35), riverhead on Feb 11, 09 6:04 PM
They will soon be praying for those vultures to come in and spread their wings. With the cutbacks on Wall Strett, does anyone really think the bonuses paid out for last year are going to be spent for a Hamptons property that will continue to decrease in value for the next 12 to 24 months? And when a very large number of the free spenders will no longer have a job due to mass layoffs, the only ones buying will be the vultures. And for those who decided to pay cash a couple of years ago and then used ...more
By TomD (2), Westhampton Beach on Feb 11, 09 7:50 PM
LM, this is par for the course for realtors, who are as morally bankrupt as the Wall Street clientele that they cater to. They will do/say anything to get their commission- 6% for a few hours of paper shuffling and sitting on their wide butts at empty open houses.
By HEJIRANYC (32), Sag Harbor on Feb 12, 09 1:37 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By TommyD, ohio on Feb 14, 09 8:26 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By michael daly (12), Sag Harbor on Feb 18, 09 10:03 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By michael daly (12), Sag Harbor on Feb 18, 09 10:04 AM
I hope real estate agents not only read this article, but also read these comments.
Consumers are tired of being "spun" and told untruths. While there are many honest real estate agents and mortgage bankers who conduct business with dignity, it's time for the those who don't to get out of the business.
By michael daly (12), Sag Harbor on Feb 18, 09 10:04 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By NYRE Biggie, Manhasset on Mar 31, 10 2:29 PM