The Hamptons Home Sales Down 19% Quarter-over Quarter in Q-3

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According to the latest Hamptons and North Fork housing market report by New York-based Prudential Douglas Elliman, sales inventories and price indicators were below prior year levels in Q3, 2010.

The median sales price of an East End residential property was $625,000, 10.7% below $700,000 in the same period last year and 19.4% less than $775,000 in the prior quarter. Average sales price followed the same pattern falling 4.9% to $1,273,775 in the third quarter from $1,339,510 in the prior year quarter and falling 6.3% from $1,360,044 in the prior quarter. The pronounced downward direction of both price indicators was due to the shift away from the elevated number of high-end sales in the prior quarter. This shift was apparent in the quintile analysis that divides the market into five equal segments by median sales price. The top two market quintiles showed declines while the bottom three quintiles showed increases.

Number of sales above prior year levels

There were 469 sales in the third quarter, 2.2% above 459 sales in the same period last year, but 19.4% below 582 sales in the prior quarter. The pronounced decline from the prior quarter marks a return to seasonality. For the past decade, the average decline between the second and third quarters was 17.1%. The prior year was the only time an increase occurred in the same period, further evidence of the unusual pattern of sales activity seen in 2009 after the Lehman tipping point. For the past two years or eight quarters, listing inventory has ranged from 2,079 to 2,419, a relatively tight spread of 340 units. Listing inventory in the third quarter was in the middle of this range at 2,271 units, 6.1% below the prior year quarter and two year peak of 2,419, but 3.7% above 2,190 seen in the prior quarter. The monthly absorption rate--the number of months to sell all existing inventory at the current pace of sales--was 14.5 months, below 15.8 months in the prior year quarter, but above 11.3 months in the prior quarter.

Days on market and listing discount contracted

The listing discount--the percentage difference between the list price at time of contract and the contract price--was 10%, below 16.9% in the prior year quarter, but above the 6.4% of the prior quarter. Days on market--the number of days between the date of the last price change, if any, to the contract date--also showed a similar trend. Properties sold an average of more than one month faster than the same period last year. Days on market was 164 days compared to 198 days in the prior year quarter, but 33 days longer than the prior quarter.

Seasonality returns as high-end market took a breather

The decline in sales from the prior quarter was consistent with historical averages of the past decade. The rise in housing price indicators eased in the third quarter as activity in the high end market fell. Regional unemployment levels remain a concern; the Wall Street yearend bonus picture is not yet clear and mortgage underwriting remains tight. The expiration of the federal tax credit played a limited role in the market this quarter as participants continued to take advantage of lower price levels and record low mortgage rates.

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Hamptons Market

Price indicators fell due to shift in mix

Number of sales trended higher than prior year quarter

There were 354 sales in the third quarter, 4.4% more than 339 sales in the same period last year, but 26.1% less than the 479 sales in the prior quarter. The prior quarter total had been the highest number of sales since the first quarter of 2007. Listing inventory has trended lower over the past year as demand increased. There were 1,583 units available at the end of the third quarter, 8.8% less than 1,735 units in the same period last year, but 1.2% above the 1,564 seen in the prior quarter. The Hamptons accounted for 75.5% of all East End sales in the third quarter edging up from 73.9% in the same period last year. With a higher price point than the North Fork, the Hamptons market accounted for 87.7% of total sales dollars, essentially unchanged from the prior year quarter. As a result of the modest increase in sales and decline in inventory, the absorption rate fell to 13.4 months from 15.4 months in the same period last year.

Price indicators fell due to fewer high-end sales

Median sales price was $696,000 in the third quarter, 14.1% below $810,000 in the prior year quarter and 22.7% less than $900,000 in the prior quarter. Medians sales price was at its lowest level since the first quarter of 2009, which was notable for its limited activity at the upper end of the market. Average sales price showed the same pattern with a 5.8% decline to $1,479,177 in the third quarter from $1,571,029 in the prior year quarter and 2.6% below $1,518,602 in the prior quarter. The market by quintile analysis showed double-digit declines in median sales price in the top three quintiles and more strength in the bottom two quintiles, due to the decline in the number of higher-end sales. The top three quintiles saw a year over year decline in quarterly median sales price, from top down of 18.9%, 25% and 14.1%. The bottom two quintiles from top down showed a decline of 5.6% and an increase of 1.8% over the same period.

Days on market and listing discount declined

A Hamptons property that sold in the third quarter took an average of 169 days to sell, more than a month and a half faster than the 213 days in the same period last year, but a month slower than 131 days in the prior quarter. Listing discount followed the same pattern falling to 8.2% from 18.7% in the prior year quarter, but up from 6% in the prior quarter. The easing in these indicators from the prior quarter represents seasonal changes from the peak quarter of the year.

South of the highway continued to lead all markets

The proximity of properties to the east and west of the Shinnecock Canal and north and south of Route 27 are popular reference points for market participants although the wide array of housing stock makes their reliability limited. The market to the south of the highway is generally characterized by having the highest priced housing in the region with limited availability of open land to the waterfront. Housing prices east of the canal tend to be higher than west of the canal for similar reasons. Over the past two years this general pattern has been in disarray due to the limited amount of sales activity at the high end of the market with the emphasis placed on smaller properties. In 2010 the market is showing these established patterns again. The median sales price of properties to the east of the canal and south of the highway were higher than their counterparts to the west and north respectively. However despite this current relationship, the limited amount of high end activity to the south of the highway was reflected in the sharp drop in the number of high end sales, not a drop in actual price levels. Properties located south of the highway had a median sales price of $785,000, 57.3% below $1,840,000 in the prior year quarter and 21.1% below the prior quarter result of $995,000. Properties to the north of the highway had a median sales price $675,000, up 12.5% from $600,000 in the prior year quarter, but 21.5% below $860,000 in the prior quarter. Properties located east of the canal had a median sales price of $840,000, 14.5% below $982,500 in the prior year quarter and 15.6% below the prior quarter result of $995,000. Properties to the west of the canal fell 10.9% to $490,000 from $550,000 in the same period last year and declined 20.6% from $617,500 in the prior quarter.

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North Fork Market

Number of sales rose again as price indicators were mixed

Number of sales increased as listing inventory stabilized

There were 115 sales in the third quarter, 4.2% below 120 sales in the prior year quarter, but 11.7% above the 103 sales in the prior quarter. Listing inventory was unchanged at 688 units in the third quarter compared to 684 in the same period last year, but up 9.9% from 626 in the prior quarter. The absorption rate was elevated, but stable over the past year. The third quarter rate was 17.9 months, up nominally from 17.1 months in the same period last year, but down nominally from 18.2 months in the prior quarter. North Fork market share of East End sales was 24.5% in the third quarter, down from 26.1% in the same period last year. Market share based on total sales dollars was 12.3%, down from the prior year quarter result of 13.4%.

Price indicators mixed

The median sales price of a North Fork residential sale in the third quarter was $489,000, up 2.4% from $477,500 in the prior year quarter and up 17.8% from $415,000 in the prior quarter. Average sales price showed more weakness with a 6.4% decline to $641,495 from $685,467 in the prior year quarter, but increased 3% from $622,674 in the prior quarter. Broken out by quintiles, the median sales price compared to the prior year quarter was mixed with no clear pattern: first quintile was up 3.2% to $280,000; second quintile was unchanged at $365,000; third quintile was up 2.4% to $489,000, fourth quintile was down 5.1% to $650,000; fifth quintile was up 3.9% to $1,325,000. Total sales dollars were at their second highest level in two years at $73,771,957.

Listing discount trended higher

Days on market was 149 days in the third quarter, 6 days faster than the 155 days in the prior year quarter, but 19 days slower than 130 days seen in the prior quarter. Listing discount showed a greater spread between buyer and seller rising to 15.5% from 11.8% in the same period last year and up from 8.5% in the prior quarter.

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Luxury Market

Listing inventory increased as price indicators were mixed

Drop in high-end sales resulted in mixed price indicators

There were 11 sales that sold at or above $5 million in the third quarter, down sharply from 20 sales in the prior year quarter and half the 22 sales total of the prior quarter. As a result, the median sales price was skewed lower. The median sales price of an East End luxury property was $3,700,000, 13.5% below $4,275,000 in the same period last year and 10% less than $4,112,500 of the prior quarter. Average sales price was up 8.1% to $6,311,557 in the third quarter from $5,836,304 in the prior year quarter and up 16.8% from $5,403,784 in the prior quarter. The low end of the luxury market, which is the top 10% of all sales began at $2,550,000, the first time this indicator has fallen below $3,000,000 in more than a year.

Listing inventory and listing discount expanded

The number of days to sell a luxury property was 137 days, down sharply from 175 days in the prior year quarter and down from 143 days in the second quarter. Listing discount was 5.9%, down from 17.1% in the same period last year and down from 11.8% from the prior quarter. Listing inventory also expanded over the past year, up 26.9% to 392 from 309 units in the prior year quarter and up from 299 in the prior quarter.

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Condo Market

Number of sales and price indicators above prior year

Number of sales trended higher

There were 24 condo sales in the third quarter, one more sale than the same period last year, but 7 fewer sales than the prior quarter total. The decline from the prior quarter is assumed to be the result of the expiration of the federal tax credit that resulted in elevated sales activity in the prior quarter. The Hamptons accounted for 79% of condo sales in the third quarter, consistent with the overall market breakdown. Listing inventory declined 9.9% to 119 from 132 in the prior year quarter, but increased 7.1% from 111 in the prior quarter.

Price indicators rose

The median sales price of an East End condo was $560,000, 29.5% above $432,500 in the prior year quarter and 14.1% above $491,000 in the prior quarter. Average sales price was up 9.2% to $561,322 in the same period last year, but 6.4% below $599,577 in the prior quarter. The small size of the condo housing market, which represents 5.1% of all sales activity results in more volatility of the price indicators. The general pattern for condo price indicators was considered stable over the past year.

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