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Real Estate Prices Still Climbing As Sales Decline And Inventory Swells

Bridgehampton – First quarter earnings are being reviewed in real estate offices across the East End as agents are reporting higher prices, fewer sales and more inventory heading into what they still hope will be a peak selling season.

Many agents indicated strong activity at the high-end of the market with several record breaking sales recorded so far this year while still others noted a dead zone in the $800,000 to $1 million price range where inventory is high. Agents in Montauk reported a strong market in condo sales where units are ranging in price from $199,000 to $500,000 and above. Others pointed to the financial devastation experienced by homeowners in Hampton Bays where 200 foreclosures were reported in 2007. Many agents indicated the next anticipated trouble spot would be in the Springs section of East Hampton.

“We are seeing the effects of sub-prime lending in these areas now,” Enzo Morabito, a broker at Prudential Douglas Elliman, said. “These are people who bought houses they couldn’t really afford to buy because of the relaxed lending practices in place at the time.”

Paul Brennan, a top broker and manager in Prudential Douglas Elliman’s Bridgehampton office, noted his crew closed 40 deals during the first quarter of 2008, a marked decline from the 68 deals closed during the first quarter of 2007.

At Prudential Douglas Elliman, the average transaction for the Hamptons and North Fork last year was an estimated $1.479 million as opposed to this quarter’s average of $1.728 million, representing a 16.2 percent increase in sales price, though numbers of sales have decreased. This year the number of sales for the first quarter topped out at 400 while last year’s first quarter number was 683.

“We are seeing a lot of activity in the condo market,” Carie Salvadore, principal broker at Pospisil Real Estate in Montauk reported. “No one is really losing money when you look at what they paid, but many sellers are still on the market at prices that are too high and they won’t come down.”

Pricing Is Key Morabito agrees – “Correct pricing is the key to selling in this market,” Morabito noted, adding the large inventory in the $899,000 range north of the Highway, which is real estate speak for houses located north rather than south of Montauk Highway. This strategic location and important distinction translates into a property’s proximity to the ocean – a factor that is dramatically reflected in value.

“Now is the time to buy north of the highway,” Morabito said. “That is where the deals are. The ocean front is still going strong and it always will,” Morabito added, noting strong sales in the high-end of the market where selling prices are still breaking records practically every time a property changes hands.

In Southampton Village all eyes are on a new subdivision located on the corner of Old Towne Road and Wickapogue Road where developer Bob Gianos is preparing to market seven four-acre building lots that have been carved out of a 53-acre farm he purchased in 2005. The former Fiore Farm was a site selected by the first settlers who came to the Village in the 1600s where village pioneers camped out in make-shift housing, surviving the winter under the harshest of conditions.

The last major farm parcel in the Village proper prior to its purchase by Gianos, building lots will sell for $18 million to $21 million when they hit the market at the end of May. Gianos’s venture, dubbed Olde Towne, is being viewed as a tremendous show of confidence in the high-end of the market by the local real estate community. “They will sell,” Gianos said, “there are only seven lots like this in the entire Village.”

Further to the east, in the Village of Sagaponack, residents are trying to stave off development and protect their few remaining farm fields by protecting farmers’ rights to farm in the face of three high-end luxury residential subdivisions now in the preliminary planning stages. The projects signify a strong show of investor confidence in this most exclusive of markets. The Village of Sagaponack has been dubbed one of the most expensive zip codes in the United States by Forbes Magazine.

“That is all prime land,” Morabito commented. Beginning his real estate career selling land in Sagaponack more than a quarter-of-a-century ago, he added, “Back then you could buy a lot for $250,000.”

“Now is the time to buy,” Brennan said. “Property out here will never lose its value. If you buy now, you are going to look like a genius in two years.”

Among the first quarter reports released this week, was a market analysis prepared by Miller Samuel, Inc. for Prudential Douglas Elliman Real Estate, a company with offices on both the North and South Forks of the eastern end of Long Island. This market study indicates that Prudential’s listing inventory on the East End increased by 25.5 percent going from 1,472 listings recorded in the first quarter of 2007 to 1,848 reported in the first quarter of 2008. The number of sales made during the first quarter of 2008 by Prudential agents has decreased by 41.4 percent with 400 sales recorded in comparison to sales figures for the first quarter of 2007 when 683 sales closed in their offices on the East End.

In a press release issued this week by Rubenstein Associates, Inc. on behalf of their clients, Prudential Douglas Elliman Real Estate notes “the lower level of sales activity is largely attributable to the declining national economic climate, tighter credit and a weaker employment picture for the New York City financial services sector.”

Back on Main Street in Bridgehampton, Brennan had the last word on the market for the moment in a business where its practitioners are strong believers in the saying “tomorrow is another day.”

“People are taking a breather,” Brennan said, “they don’t know what’s going on.”

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