Sub-US$1m homes a draw as Hamptons prices fall
With median sale values down 10pc in a year, one buyer believes his US$490,000 home would have cost US$1 million before the crash
The average price of homes sold in New York's Hamptons, the Long Island oceanside retreat for summering Manhattanites, declined in the third quarter as mortgage rates near record lows focused buyer attention on cheaper properties.
The median price of homes sold fell 10 per cent from a year earlier to US$765,000, according to a report by New York consultant Miller Samuel and broker Prudential Douglas Elliman Real Estate. In the Hamptons and North Fork, the median for luxury properties, defined as the top 10 per cent of all sales, fell 23 per cent to US$4.23 million. About 63 per cent of luxury deals were for properties under US$5 million.
"Multimillion-dollar properties, that's the brand of the Hamptons," said Jonathan Miller, president of Miller Samuel. "But there's an expansion to that, so it's not as one- dimensional as it was during the peak."
Property prices that are 30 per cent below their 2007 peak have drawn new buyers to the second-home market in the Hamptons, according to Miller. Homes priced at less than US$1 million, which draw buyers who rely on mortgages, accounted for 70 per cent of sales in the quarter as borrowing costs approached all-time lows, he said.
The average rate for a 30-year fixed US home loan fell to a record-low 3.36 per cent earlier this month, according to mortgage-financier Freddie Mac.
"If you look at monthly payments on mortgages, the prices have become very competitive with rental prices," said Terry Thompson, a Long Island-based broker with Prudential Douglas Elliman. "Low interest rates and lower-priced homes are giving renters an unprecedented opportunity to own versus rent."
Thompson helped Gennaro Vendome and his wife, Carol, find a four-bedroom home in Hampton Bays for US$490,000, a 4.9 per cent discount from its original asking price, after they decided to sell their second home in Montauk, at the easternmost end of Long Island, after seven years. They chose Hampton Bays after Thompson found a place in the town for their daughter's in-laws for US$615,000.
The couple, whose main home is in Manhattan, had been searching for a new second home closer to the city with more amenities, according to Gennaro Vendome. The deal was well-timed, he said. The couple sold the Montauk home for a profit and completed the new transaction with cash.
"There are some real great deals out there, great homes," said Vendome, 66, a real estate investor who owns apartments in Manhattan and Queens. "The home we got, I would say in the pre-banking-collapse days, that would be close to a million-dollar home." Brown Harris Stevens real-estate agents, which also released a report on the Hamptons today, said the number of homes sold for less than US$1 million in the quarter increased 25 per cent from a year earlier. The surge pushed down the median price of single-family properties that changed hands in the period to US$850,000, a 6 per cent drop from the third quarter of 2011, according to the brokerage.
"There's a lot of people worried about Wall Street," said Gregory Heym, chief economist for New York-based Brown Harris Stevens. "Bond yields are at record lows, and people look to real estate to provide both the stability and a higher rate of return."
The number of Hamptons homes on the market fell 16 per cent from a year earlier to 1,302 as owners refrained from listing their properties, Miller said.
The absorption rate, or amount of time it would take to sell all the listed homes at the current pace of deals, was 9.6 months, down from 11.7 months a year earlier. "Sellers become buyers, and if they can't trade up, they wait," Miller said.
With the Federal Reserve signalling it will keep borrowing costs low at least until 2015, sellers aren't in a rush to capitalise on rising buyer demand, he said.
"The sense of urgency has been removed," Miller said. "Sellers aren't worried that they're going to miss the market."