| Market Update | Activity
Starting at the end of September 2008, Buyers who had been waiting for the bottom of the market to materialize were out en force after the economic downturn, scoping out properties and submitting mostly low offers. Between Presidents Day and Easter, after a virtually non-existent selling winter, agreements were reached between buyers and sellers and sales were accomplished. Because financing was still tight, most were cash transactions.
Beginning February through Memorial Day, inland homes in the >$1m price range and one waterfront property at $1.5m dominated transfers.
Between Memorial Day and July 4th, waterfronts were favored with closings at relatively strong selling prices but with properties selling for around 25% lower than 2007.
Properties inland between $1m and $2m were seeing little activity during the spring and early summer. One recently constructed home on 1.5 acres with reserve views and a pool bordering the Village of Dering Harbor, which had been listed in the $1.6m range and reduced to $1.25m closed during the summer at $1,065m. Another home with recent upgrades and winter water views that had price revisions down to the $1.2m range had a potential purchaser who was pre approved and concerned about the appraisal process. The seller, astute in business and understanding how important getting the house to appraise correctly, and wanting to see the sale proceed smoothly, asked to see the comparable sales and agreed to a selling price at slightly less than $1m.
In July, it appeared that the bottom had passed, although there continued to be some buyers placing offers at 50% of the listing price with little success. The old adage: “you can only see the bottom through the rear view mirror” held true.
August through Labor Day was non-stop activity, with the phone ringing from 7:00 am until well after 10pm, and showings beginning before 9am and ending after 8pm in many cases. For five weeks, every pricing sector on Shelter Island was actively shown.
Showings quieted a little after Labor Day, which is not unexpected, but numerous buyers who had begun their search earlier in the year located properties that met their criteria and placed offers which have gone to contract.
Post Thanksgiving, several sellers who either had an active listing or were about to list their properties, have taken their homes off the internet, leaving them active for real estate agents to show, but keeping them “fresh” for the upcoming Spring selling season.
As of January, there are three properties, one in need of renovation on the water, the second a recently built water view and the third inland--one of the first spec homes built on Shelter Island, that are scheduled to close at some point during the first quarter at very strong selling prices.
Pricing on Shelter Island
Buyers interested in purchasing on Shelter Island, as in many East End locales, face pricing that can be confusing; Shelter Island has for years been a market where there is little inventory and even in a healthy market, a property can take a year to sell.
As such, a property listed before September 2008 with no pricing revisions may be priced very differently from a comparable one listed after September 2008. Many sellers who experienced the 50% less offers decided to keep their old pricing to “see what happens”, while Sellers entering the market priced to recent transfers. The result has been that Sellers priced to recent transfers have had better success in selling.
The Buyers
What are buyers looking for? The range of customers in the marketplace today is broad and only slightly different from those 2 years ago. First time home buyers, investment buyers, and the majority of mine—contemplative customers who have been trolling the real estate market for many years, have figured prominently whereas 2 years ago, there was a “must-have, jump in” attitude from buyers with shorter negotiations and fewer complications.
On both the selling and purchasing sides, there are people with whom I have been in regular contact, in some cases for up to 10 years, establishing a relationship and talking about real estate. These people this summer made a decision to list or to buy. A homeowner I had been communicating with since 2004, who had an incredible waterfront property with a grandfathered dock, decided to downsize. A buyer I’d met in 2002 and worked with to target properties to purchase, finally located the home he’d been waiting for. Both properties sold at final numbers lower than they might have gotten 2 years ago, but in both situations, the parties were happy at closing.
There is a definite feeling that there has been a shift—many of my relationships with potential purchasers and sellers “closed” in the truest sense. Many old contacts are now ensconced in their new homes and others have packed and moved on. There is personal satisfaction on one level and wistfulness on the other.
Contrary to the beliefs of many, there are always new customers entering the marketplace, some on a mission to buy. This summer, a customer called with some very intricate questions. Within days, he and his wife came to see some properties. Over a period of 3 weeks, we had visited nearly every waterfront property with either the potential of a dock or far away views. One particular home that faced the rising sun, had a master suite with exquisite angles on the harbor and pre-existing, non conforming foundation and pool caught his eye. After a protracted and sometimes arduous process, the house closed at a strong price.
Cash transactions have dominated the marketplace, although in the past several weeks, more customers are inquiring about financing or have come with pre-approvals in hand.
Benefits offered by the Federal government have resulted in a shot in the arm to entry level home buyers on Shelter Island. Entry level homes, priced at up to about $595k, have had good activity, with several closings in September through November and with one more listing in the high $500k range going into contract in the next couple of weeks. Several homes have closed in the $300k range; Properties in this price category 2-3 years ago were very hard to come by. Many buyers in this category seek to get financing, and appraisals are crucial to obtaining a mortgage. Once these sales become public record, similar homes priced higher, will feel the impact on transactions that depend on comparable sales to obtain financing.
Acreage
Land sales have been nearly non-existent. One parcel, priced to sell near a resort area, had a buyer who had been pre-approved for a construction loan and who had done exhaustive research on the process of building a home. After several weeks and prior to going into contract, the buyer decided “now is not the time to build a house”. Financing has begun to get easier for construction loans but there is still little activity this year in this category.
Selling Versus Renting
Prior to the downturn last year, properties for sale that were occupied by a seasonal renter, while sometimes difficult to show, frequently found a buyer. During the Summer 2009, rented homes which were also on the market for sale, had a harder time getting sold. Because the rental market this past season was a tenant’s market, many landlord/sellers agreed to “no show” clauses. Others agreed to limited showing hours and still others made few or no demands within the lease that the house be in clean condition to show for sale. Many of these landlord/sellers wound up scrambling for potential buyers after Labor Day. Two that had been problematic showings because of tenant occupancy found buyers; Four properties that had been rented and also for sale still have not found buyers.
I advise sellers who have an interest in also renting to prioritize selling versus renting and stick to the plan. In November, two clients whose houses had been difficult to show because of tenants, asked “why didn’t my house sell?” and “you sold x house in a similar price range, what about mine?”
The Rental Market
Rentals during the 2009 season were brisk, and in many cases high maintenance. In contrast to previous seasons, there was a lot of negotiating, a lot of requests for perks. Landlords who committed early to a tenant seemed to fare better in obtaining longer terms and better rental rates.
Post Labor Day 2009 there were already tenants touring for 2010 summer rentals. Coming off a season where Landlords in many cases had very low offers to rent, for the 2010 season many are already raising their prices, even to tenants willing to sign a lease immediately.
The Town of Shelter Island and Real Estate Signs
During the late summer, the Town of Shelter Island Building Inspector sent out warnings to real estate agencies that signs placed by real estate agents would be considered illegal and agents could face “criminal prosecution”, although sign ordinances do not fall under criminal jurisdiction.
The Shelter Island Town ordinance pertaining to signs reads that “For Sale and For Rent signs placed by the owner shall not be more than 2’ x 2’. I have posted 9” x 12” brochure stands on properties I have listed for several years. The flyers in the stands are print-outs of what a customer would receive if they inquired about a property, so when a potential buyer calls after picking up a flyer, they have received more information than simply a sign would provide. Since these brochure stands technically are not signs and since the ordinance as written does not prohibit real estate signage, I did not remove my brochure stands and received a summons from Shelter Island Town to appear in court.
Town Supervisor, Jim Dougherty, announced at a Town Board meeting that “if we have a law we should enforce it” noting “what we’re talking about here is visual pollution”. Without discussing the constitutionality or the questionable grammatic composition of the ordinance, Dougherty proceeded to uphold an ordinance with their own interpretation. Dougherty himself was an active participant during his re-election bid planting “visual pollution” on Island roadsides with his and other Town Board members’ signs.
Several real estate agents who object to real estate signs either have no listings on the island or were candid that they are fearful that Corcoran’s presence would dominate the island. One agency which is vocal in their opposition to real estate signs has in front of their office: an illuminated sign (which is illegal) next to 4 other signs (3 too many).
Shelter Island Town has no objection to signs that advertise: contractors’, architects’, building supply companies, plumbers, electricians, landscapers but has singled out real estate agents trying to assist their clients in the sale of a property.
Case law has upheld municipalities’ right to dictate size, color of a sign and duration of posting, but not its content.
As of this writing, the Town has scheduled a meeting in late January to revise the sign ordinance but has not responded to whether they will dismiss the charges against me.
The Statistics
The year-end numbers indicate that this is still a buyers market, although there has been gradual improvement over the last 12 months.
On Shelter Island...
--The overall volume in 2008 was $75,140m versus $43,027m in 2009, a decline of 43%
--The average in 2008 was $1.43m versus $978k in 2009, a decline of 34%;
--The median price in 2008 was $976k versus $760k in 2009, a decline of 22%;
--and the number of units, which represents the actual buyers in the market was 51 in 2008 versus 44 in 2009, a decline of 14%
What do these numbers indicate? This is still a buyer's market. If you are in the market to purchase, this is the time to come out and look at what is available and what has traded in your price point. If you are a seller, the reality seems from all indicators to be that the boom market, which was propped up by factors which no longer exist, is not returning. There are still qualified purchasers for properties in all categories, so if there is a need to sell, check out the comparable sales, which is what the banks will do if a buyer comes on the scene, and price accordingly.
Winter 2010 Activity So Far...
The 2009 selling market has been steady with a little bit of everything: great selling prices for buyers, relatively strong selling transfers for sellers albeit not the numbers we saw 2 years ago, and a little bit of in-between.
There are many properties on the market priced well and good opportunities. And there are still those homeowners who are waiting for the market to return to the heady days of the boom two+ years ago. They may be waiting a long time. To be continued… |  |
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Penelope Moore