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Prudential Douglas Elliman Releases Hamptons and North Fork Q-3 Market Report

Prudential Douglas Elliman Releases Hamptons and North Fork Q-3 Market Report

Residential News » Residential Real Estate Edition | By Dottie Herman | October 23, 2009 8:00 AM ET



Number of sales surged as price indicators moved sideways

Listing inventory expanded despite growth in number of sales

(NEW YORK, NY) -- Listing inventory expanded 21.5% to 2,419 units from 1,991 units in the prior year quarter and 5.8% higher than the 2,286 units in the prior quarter. The jump in the number of sales over the summer prompted many sellers to return their listings to the market. There were 459 sales in the third quarter, 49.5% more than the 307 sales of the prior quarter and 29.3% more than the 355 sales in the prior year quarter. The number of sales was the highest quarterly total since the second quarter of 2008, when there were 541 sales, but was 56.4% below the record high water mark of 1,052 sales in the second quarter of 2004. Monthly absorption, the number of months it would take to sell existing inventory at the current pace of sales, peaked in the first quarter of 2009 at 34.2 months. The absorption rate fell in the second quarter to 22.3 months and fell in the third quarter to 15.8 months or roughly half the rate of peak, indicating that the pace of sales activity has been faster than new inventory being added to the market.

Price indicators move sideways

Median sales price was $700,000, down 4% from, $729,000 in the prior year quarter, but up 2.9% from the $680,000 of the prior quarter. Average sales price was $1,339,510 in the third quarter, up 1.3% from the $1,321,736 of the prior year quarter and up 4.3% from the $1,284,486 of the prior quarter. The increase from the prior year quarter was the first gain after five consecutive quarters of year over year declines. The median sales price of $700,000 is 22.2% below the $900,000 peak median sales price in the second quarter of 2007. In addition, there was a reversal of recent price trend patterns with gains in the median sales price by quintile, which showed in the top two quintiles while the lower quintiles declined as compared to the prior year quarter. In the top fourth and fifth market quintiles, the change in median sales price compared to the prior year quarter was 6.7% and 13.8% while the first, second and third quintiles declined  22.8%, -6.2% and -4% respectively. It is not clear whether this will develop into a trend or is simply an anomaly.

Days on market and listing discount expanded

The surge in sales activity this quarter reflected buyers moving "off the fence" and making purchase decisions in large numbers. As a result, many properties that had seen little interest by market participants and had been languishing on the market for extended periods of time went to contract over the summer. As a result, days on market jumped to 198 days, 42 days longer than the 156 days in the prior quarter and up 25 days from 173 days in the prior year quarter. Listing discount saw a similar pattern and was influenced by the same factors. The listing discount was 16.9%, up from 16% in the prior quarter and up from 10.2% in the prior year quarter. Since the number of sales has surged despite the increase in listing discount, the trend indicates that sellers have been more willing to travel further from their listing price to meet the buyer and agree on a sales price.

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Hamptons Market

Listing inventory expanded while prices indicators were mixed

Price indicators were mixed

The average sales price of a Hamptons property was up 2.2% to $1,571,029, from the prior year quarter average sales price of $1,537,512 and up 4.7% from the prior quarter average sales price of $1,500,735. Median sales price was $810,000 in the third quarter, down 2.4% from the $830,000 median sales price of the prior year quarter, but up 5.2% from the prior quarter median sales price of $770,000. The decline in median sales price compared to the same period last year was distributed across the first three quintiles, -19.7%, -3.8% and -2.4% respectively. In contrast, the fourth and fifth quintiles saw 13.4% and 4% increases over the same period, a change from recent trends which reflected price declines across all quintiles.

Numbers of sales declined as listing inventory rose

There were 1,735 properties listed for sale at the end of the third quarter, 11.1% more than the 1,561 listings available in the same period last year. Listing inventory was also up 4.4% from 1,662 listings in the prior quarter. This expansion of inventory contradicts the surge in sales activity over the same period. There were 339 sales in the current quarter, up 31.9% from 257 units in the prior year quarter and up 46.8% from 231 units in the prior quarter. Typically an increase in the number of sales works off excess inventory. However, the upturn in the number of sales was so rapid and significant, that a lot of new inventory was returned to the market as sellers attempted to take advantage of the newly active housing market. The Hamptons submarket accounted for 73.9% of all East End sales this quarter, and accounted for 86.6% of total sales volume. As a result of the combination of the expansion of inventory and expansion in the number of sales, the monthly absorption rate fell this quarter to 15.4 months, from 18.2 months in the prior year quarter and from 21.6 months in the prior quarter.

Listing discount and days on market expand

It took an average of 213 days to market a property, 38 days longer than the 175 days on market in the same period last year and 57 days longer than the 156 days in market of the prior quarter. Although the increase in listing inventory provided buyers more choices and expanding the time it took to purchase a property, the sudden increase in number of sales caused stagnant listings to sell, helping push this metric unusually high. Listing discount also expanded this quarter, rising to a near term record 18.7% as compared to the 10.5% listing discount in the same period last year and 16.2% in the prior quarter. In the current market, the increase in the listing discount combined with the jump in the number of sales suggests that sellers are becoming more willing to travel further to chase the market.

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. Two of the four submarkets showed a decline in median sales price from the same period last year. Properties to the north of the highway had a median sales price of $600,000, 13.4% below the $692,500 median sales price of the prior year quarter and 15.8% below the $712,500 of the prior quarter. The median sales price of a property to the east of the canal, which overlaps the south of the highway market, was $982,500, or 0.5% below the prior year quarter result of $987,000 and 1.7% below the $999,750 median sales price of the prior quarter. The remaining two submarkets showed increases in median sales price. The market to the south of the highway is characterized by having the highest priced housing in the region with limited availability of open land to the waterfront. After several quarters, with the number of sales falling sharply below trend, there was a surge in sales of high end properties causing the jump in median sales price to be a reflection of the change in property mix rather than a price trend. The median sales price of properties to the south of the highway was $1,840,000, up 67.3% from the prior year quarter median sales price of $1,100,000 and more than double the $900,000 median sales price of the prior quarter. Properties to the west of the canal had a median sales price of $550,000, or 5.3% above the median sales price of $522,500 seen in the prior year quarter and 12.2% above the $490,000 median sales price of the prior quarter.

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North Fork Market

Price indicators and number of sales rose over summer

Number of sales rose as listing inventory expanded

There were 120 sales in the third quarter, up 22.4% from 98 sales in the prior year quarter and jumped 57.9% from the 76 sales in the prior quarter. There were 684 listings available in the third quarter, up 59.1% from the 430 listings of the prior year quarter and up 9.6% from 624 listings in the prior quarter. The rise in number of sales more than offset the rise in listing inventory, causing the monthly absorption rate to decline. Monthly absorption is calculated by the number of months to sell all listing inventory at the current pace of sales. The monthly absorption rate, which has averaged 14.5 months over the past two years, was 17.1 months in the third quarter, up from 13.2 months in the same period last year and down from 24.6% in the prior quarter. The North Fork accounted for 26.1% of all East End sales and 13.4% of all sales volume.

Price indicators up from prior quarter

The median sales price was $477,500 in the third quarter, down 17% from the $575,000 of the prior year quarter, but up 6.1% from the prior quarter result of $450,000. Average sales price was $685,467, down 9.3% from the $755,881 of the prior year quarter, but 9.3% higher than the $627,204 of the prior quarter. The surge in the number of sales helped the price indicators see increases over the summer. Median sales price by quintile showed declines from the prior year quarter across all segments, while the first, third and fourth quintiles posted increases from the prior quarter.

Days on market stabilizes over the summer

The days on market was 155 days in the third quarter, down 8.3% from 169 days in the prior year quarter, but unchanged from the prior quarter. Listing discount was 11.8%, up from 9.4% in the prior year quarter, but down from 15.5% in the prior quarter. The stabilized days on market and decline in the listing discount are consistent with the surge in the number of sales.

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Luxury Market

Listing inventory declined as prices increased

Price indicators increased over summer months

The median sales price was $4,275,000, down 10.9% from the $4,800,000 of the prior year quarter, but up 7% from the $3,996,500 of the prior quarter. Average sales price showed more gains as a result of the uptick in high end sales. The average sales price was $5,836,304, up 1.3% from the $5,759,504 of the prior year quarter and jumped 17.4% from the $4,972,797 of the prior quarter. There were 20 sales at or above the $5,000,000 threshold for the third quarter, compared to 17 sales in the prior year quarter and 14 sales in the prior quarter. The luxury market started at $3,200,000 in the third quarter, up from $2,775,000 in the same quarter last year.

Apartments on market fell sharply

Listing inventory dropped 24.8% to 309 units from 411 units this time last year and fell sharply by 47.1% from 584 listings in the prior quarter. Days on market was 175 days in the third quarter, up from 117 days in the prior year quarter and basically unchanged from 176 days in the prior quarter. Listing discount was 17.1%, up from 13.8% in the prior year quarter, but down from 19.8% in the prior quarter.

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Condo Market

Price indicators continued to trend lower

Listing discount and days on market declined from prior quarter

The spread between the list price and contract price, otherwise known as listing discount, increased to 9.6% from 8.1% in the prior year quarter, but fell sharply from 21.2% in the prior quarter. Days on market showed a similar patter, rising to 132 days from 117 days in prior year quarter, but down sharply from 267 days in the prior quarter. The smaller data set for the condo market creates more volatility in these statistics.

Price indicators declined as listing inventory expanded

The median sales price of a condo fell 9.5% to $432,500 from the $478,000 of the prior year quarter and down 4.9% from the $455,000 of the prior quarter. The average sales price fell 13.6% to $514,036 from the $594,868 of the prior year quarter and down 5.5% from the $544,200 of the prior quarter. There were 23 condo sales, unchanged from the prior year quarter and up from 15 sales in the prior quarter. Sales activity continues to be one third the market norm that was seen three years ago. With the decline in sales, listing inventory expanded 29.7% to 83 properties, from 64 properties listed in the prior year quarter.

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Real Estate Listings Showcase

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