Tuesday, July 8, 2008

Hamptons Report: Buyer's Market Could Not Be More Obvious

The writing has been on the wall for the better part of the last year. First came the mortgage crisis which sapped the ability of average working people to buy a house. Not that they didn't have the income or decent credit score, the target moved and these people were no longer qualified for a mortgage. So, last year, the Hamptons housing market suffered on the low end (call it Six figure homes). This year, the dynamics have turned even more negative and widespread. In addition to even tighter lending standards, Wall Street money, which buffets the Hamptons market, has clearly dried up for the time being. The result, less sales and more inventory. While those dynamics usually result in lower prices, it is clear both that it hasn't happened to a large extent just yet, and it also seems that it is undeniably inevitable. To be sure, I set out on an open house tour of my own making this weekend.
At every stop, in nearly the same breath as introducing themselves, brokers were talking "wiggle room", "negotiation", and "being due for a price adjustment" before even showing the house. What kind of an offer? Well, it seemed like 10% below ask would actually be welcomed.
Underscoring the desperation that is beginning to wreak from these brokers is an experience I had on Saturday. I attended an open house for a spec house down the block from me (that's listed at $2.7 and has been on the market for a year). I had made the mistake of telling him which house I lived in. I told him that it wasn't me in the market, but my brother-in-law, and that he'd be stopping by shortly. The open house was scheduled for 1-3pm, I left my wife and kids at the house for nap time. Sure enough, just as they had fallen asleep (a tough task in itself), at 2:45, the broker drove up and started yelling "hello" through the screen door. While I admired his initiative (to give us a show sheet for my brother-in-law), I was not happy that the kids were woken up, and I will never tell a broker where I live again (at least in a buyer's market).
Where brokers wouldn't give you the time of day 2 years ago, things have certainly changed out East. Given the relatively sparse amount of foreign money rolling into the Hamptons market, and the dim outlook for Wall Street over the next year, I doubt that a bottom will be seen out there until the winter of 09'-10'. If Wall Street catches fire any earlier that could change, but in the meantime, you may want to keep your home address to yourself.

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