Following yesterday's release of the Prudential Douglas Elliman market report for the first quarter, we asked graphical guru Jonathan Miller of Miller Samuel and various bloggy pursuits to enlighten us further on the state of the market. (Many more of Miller's Three Cents Worth columns concerning New York City can be found here.)
Yesterday, we released the 1Q 2010 Hamptons/North Fork Market Overview that we prepare for Prudential Douglas Elliman and for a change it seemed to be full of "happy" news on the state of the real estate market. Compared to this time last year (which makes ANY market today look great), sales up sharply, price indicators up sharply, inventory flat, more high end sales.
Okay, so things are better than last year—a lot better. But in what context? I wanted to provided a little more perspective on the results by looking at the number of sales and average sales price adjusted for inflation. I picked average sales price over median sales price because in theory it'll exaggerate the skew caused by the high-end of the market. After all, the top 10% of all sales accounted for 44.6% of the dollar volume this quarter.
While there were 141.8% more sales or 486 units in 1Q 2010 versus 201 sales in the same period a year ago, current activity is less than half the recent peak. The high water mark in my data was set 2Q 2004 with 1,052 sales and a close second with 1,051 sales in 2Q 2005. I dislike any comparisons to the '04-'07 period because that was the credit boom and more of an anomaly. While I now have collected Hamptons/North Fork data going back 20 years, I have only compiled back seven years, at the onset of the bubble. We'll crunch it and get it online over the coming months to compare volume today to pre-bubble for a reality check.
In the meantime...
Peak (3Q07) to trough (1Q09) median sales price (unadjusted) fell 31.4%. THAT was the key driver for demand now despite the problems with lenders—new-found affordability brought people into the market at all price points.
Prices are currently flat across the region, not seeing double-digit gains as reflected by the price indicators in our report—that was a function of skew caused by the noticeable return of high-end activity across all markets. The same pattern was seen in Manhattan, Brooklyn, Queens and Long Island.
The resurgence in high end sales activity in the first quarter was helped fueled by some of the largest price drops during the past several years. The high end market saw the largest decline over the peak to trough period. The top market quintile (highest 20% of all sales) fell 43.3% from peak to trough while the bottom quintile (lowest 20% of all sales), fell 31.5%. Both are significant declines but the high-end was hit harder.
Listing inventory was essentially flat (up only 1.3%) over the past year despite the fact that sales were up 141.8% over the same period. We would have expected inventory to drop sharply as the surge in sales worked off excess supply. But that didn't happen. Sellers who had pulled their properties from the market last year when things looked bleak re-entered the market to take advantage of better conditions.
The additional inventory added to the market more than offset inventory being sold off during the surge and will likely help keep prices in check... and seller's heads out of the sand.
· Hamptons Average Sales Prices (Inflation-Adjusted) vs. Number of Sales [MS]