'The Hamptons' Home Sales Spike 89.6% Year-over Year in Q2

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According to a new report released this week by Prudential Douglas Elliman, price indicators rose as number of sales increased sharply in the Hamptons and Northfork real estate markets in the 2nd quarter of 2010.

Number of sales nearly doubled as listing inventory slipped

The number of sales was up sharply from the same period last year. There were 582 sales in the second quarter, up 89.6% from 307 sales in the same period last year and up 19.8% from 486 sales in the prior quarter. This is consistent with the 5-year quarterly average of 559 sales. There were 2,190 listings at the end of the second quarter, 4.2% below the 2,286 in the same period last year and 5.5% below the 2,318 in the prior quarter. Listing inventory was 13.5% above the 5-year quarterly average of 1,894. The combination of rising sales and falling inventory resulted in a decline in monthly absorption--the number of months to sell all listing inventory at the current pace of sales. The monthly absorption rate was 11.3 months, approximately half the 22.3 month absorption rate in the same period last year.

Price indicators rose across all quintiles

Average sales price was $1,360,044 in the second quarter, up 5.9% from $1,284,486 in the prior year quarter, but 13.2% below the $1,567,580. The median sales price of an East End property in the second quarter was $775,000, 14% higher than the $680,000 seen in the prior year quarter, but down 3.1% from $800,000 in the prior quarter. The decline from the prior quarter was caused by an unusual concentration of high end sales in the first quarter. To illustrate, there were 22 properties that sold at or above 5,000,000 in the second quarter compared to 28 sales in the first quarter. The upper end of the market saw higher prices achieved across all quintiles, as measured by median sales price when compared to the same period last year, with larger percentage gains seen at the higher end.

Days on market and listing discount trended lower

The increase in number of sales and decline in inventory resulted in a reduction in the time properties sat on the market until sold and the negotiability between buyer and seller. Days on market--the number of days from the last listing price change, if any, to contract date--averaged 131 days, more than three weeks faster than the 156 days seen in the prior year quarter and the prior quarter. Listing discount-- the percent spread between the listing price at the time of contract and the contract price-- declined sharply. Listing discount for the second quarter averaged 6.4%, down sharply from 16% in the same period last year and down from 11.6% in the prior quarter.

East End market continued to show stability

Rising sales, declining inventory and consistent price indicators for the East End reflected a more stabilized housing market in the second quarter. The market began to show improvement in the third quarter of 2009 with a return to a more normalized level of sales activity and in the first quarter of 2010 with stabilized price indicators. However, regional unemployment remains elevated and mortgage terms remain tight, tempering further improvement in the housing market. The overall improvement was primarily attributable to mortgage rates at historic lows and lower price levels after the "Lehman tipping point" at the end of 2008. The federal tax credit played a role in the improvement, but likely not to the degree in other parts of the region, due to the large concentration of second homes in the East End market.

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Hamptons Market - Number of sales increased sharply as price indicators rose

Price indicators higher than same period last year

The median sales price of a Hamptons property was $900,000 in the second quarter, 16.9% above the $770,000 seen in the prior year quarter and 0.9% below the $908,500 of the prior quarter. Median sales price by quintile was up 0.6% to 16.9% across the first four quintiles compared to the prior year quarter. The fifth or top quintile had a median sales price of $3,225,000, which was down 3% from $3,325,000. Average sales price was $1,518,602 in the second quarter, up 1.2% from $1,500,735 in the same period last year, but 13.4% below the $1,735,608 of the prior quarter.

Highest number of sales in three years

There were 479 sales in the second quarter, more than double the 231 sales of the prior year quarter and 21% more than the 396 sales in the prior quarter. The level of activity in the second quarter was slightly higher than the quarterly average of the past decade, which is 448 sales. Listing inventory was 1,564 in the second quarter, 5.9% less than the 1,662 in the prior year quarter and 4.6% less than the 1,640 listings in the prior quarter. Listing inventory trended lower due to the surge in the number of sales over the same period. The decline however, was less than the increase in the number of sales, indicating that sellers, likely those who had removed their properties from the market last year, returned to the market at a faster pace than sales activity could absorb. Still, the monthly absorption rate--the number of months to sell existing listing inventory at the current pace of sales--declined at a precipitous pace to 9.8 months from 21.6 months in the prior year quarter and from 12.4 months in the prior quarter. The monthly absorption rate averaged 14.5 months over the past two and a half years, when listing inventory began to be tracked. Hampton property sales account for 82.3% of all East End sales and 91.9% of total dollar volume. The total dollar volume of sold property in the second quarter reached $727,410,427, more than double the prior year quarter total of $346,669,785 and the highest level since the 4th quarter of 2007 when total dollar volume reached $778,674,452.

Days on market and listing discount declined

The sharp increase in the number of sales and decline in listing inventory caused the days on market and listing discount metrics to fall. Days on market declined by 25 to 131 days from 156 in the prior year quarter and declined by 27 days from 158 days in the prior quarter. Listing discount fell sharply to 6% from 16.2% in the same period last year and from 12.2% in the prior quarter.

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 the smaller properties. In 2010, there has been some indication that the market is returning to previously-established patterns. Properties to the south of the highway and east of the canal were once again higher than their counterparts to the north and west respectively. The change was brought about by the return of higher end sales in the region. Properties located south of the highway had a median sales price of $995,000, 10.6% above the $900,000 seen in the prior year quarter, but 16.2% below the prior quarter result of $1,187,500. Properties to the north had a lower median sales price than properties to the south had, rising 20.7%% to $860,000 from $712,500 and were 5.8% above the prior quarter average of $812,500. Properties located east of the canal had a median sales price of $995,000, 0.5% below the prior year quarter's $999,750 and 22% below the prior quarter result of $1,275,000. Properties to the west of the canal jumped 26% to $617,500 from $490,000 in the same period last year and increased 20.5% from $512,500 in the prior quarter.

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North Fork Market - Number of sales rose as price indicators declined

Number of sales increased as listing inventory stabilized

There were 103 sales in the second quarter, 35.5% more than the 76 sales in the prior year quarter and 14.4% more than the 90 sales in the prior quarter. Listing inventory was essentially unchanged at 626 compared to 624 in the prior year quarter and down 7.7% from 678 in the prior quarter. As a result of the decline in listing inventory and rise in the number of sales, the monthly absorption rate edged lower. The second quarter absorption rate was 18.2 months, down from 24.6 months in the same period last year and down from 22.6 months in the prior quarter. North Fork market share in the East End was 17.7% in the second quarter and total dollar volume was 8.1%.

Price indicators declined

Median sales price was $415,000 in the second quarter, down 7.8% from $450,000 in the prior year quarter and down 19.6% from $516,000 in the prior quarter. Average sales price followed the same pattern, falling 0.7% to $622,674 from $627,204 in the prior year quarter and down 16.9% from $749,057 in the prior quarter. Like the Hamptons, the North Fork market experienced an unusual surge in high end sales in the first quarter causing the price indicators to show negative price trends in the spring market when in fact the decline was caused by a shift to a more balanced mix. The top four quintiles, as measured by median sales price, all showed price declines from the prior year quarter and prior quarter. The first or bottom quintile, showed an increase in median sales price as compared to the prior year quarter and prior quarter results.

Days on market and listing discount fell

The increase in the number of sales and stabilization of listing inventory influenced the listing discount and days on market metrics lower, but not enough to keep price indicators from falling. Listing discount was 8.5%, less than the 15.5% in the same period last year and the 8.8% of the prior quarter. Days on market fell 25 days to 130 from 155 days in the prior year quarter and fell 20 days from 150 days in the prior quarter.

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Luxury Market - Days on market fell

Year-over-year price indicators rose for second consecutive quarter

The median sales price of a luxury property was $4,112,500 in the second quarter, 2.9% higher than the $3,996,500 of the prior year quarter, but 25% below the $5,484,934 in the prior quarter. Average sales price followed the same pattern with an 8.7% increase to $5,403,784 in the second quarter from $4,972,797 in the prior year quarter, but 22% below the $6,931,669 of the prior quarter. The sharp prior quarter declines in price indicators reflect the spike in high-end sales in the first quarter. There were 28 sales at $5,000,000 or above the first quarter and 22 sales in the second quarter. The luxury threshold was $3,000,000 in the second quarter, marking the bottom of the top 10% of all sales in the second quarter based on sales price.

Listing inventory and days on market fell

There were 299 listings in inventory at the end of the second quarter, a 48.8% decline from 584 listings in the prior year quarter, but 4.5% more than the 286 listings in the prior quarter. Days on market fell to 143 days from 176 days in the same period last year, but up from 130 days in the prior quarter. Listing discount fell to 11.8% from 19.8% in the prior year quarter and up nominally from 11.5% in the prior quarter. 

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Condo Market - Number of sales jumped as days on market dropped

Price indicators increased

The median sales price of an East End condo was $491,000, 7.9% higher than the prior year quarter's $455,000 and 3.4% higher than the $475,000 median of the prior quarter. Average sales price followed the same pattern, rising 10.2% to $599,577 in the second quarter, from $544,200 and up 25.2% from $478,875 in the prior quarter.

Number of sales doubled

There were 31 sales in the second quarter, more than double the 15 sales in the prior year quarter and 10.7% more than the 28 sales in the prior quarter. Condo sales represented 5.3% of total East End sales in the second quarter, up nominally from 4.9% in the same period a year ago. The small number of sales and market share cause the price indicators to show volatility. Listing inventory was 155 at the end of the second quarter, up 56.6% from 99 listings in the prior year quarter and up 4% from 149 in the prior quarter. As a result of rising sales and despite rising listing inventory, the monthly absorption rate dropped to 15 months from 19.8 in the prior year quarter and from 16 months in the prior quarter. The Hamptons market represented 84% of condo sales and the North Fork represented 16%, essentially unchanged from the same period last year.

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