The Prudential Douglas Elliman real estate agent and President of the Sag Harbor Chamber of Commerce who talks about the downturn in the economy and the effect on the real estate market and Main Street businesses.
By Kathryn G. Menu
Given your unique perspective with the chamber and as a real estate agent, what do you see as the current climate of Main Street in the face of the economic downturn?
I can say that Main Street has been okay so far. In fact sales have been at the least as good as last year. The fall has been steady – with the Sidewalk Sale promotion there was a huge jump in sales, which we are very happy about. Going forward, the shopkeepers have ordered their holiday merchandise and are expecting a steady holiday shopping season, which is interesting when you listen to the news about the rest of the United States. I still believe we are a little insulated [from the downturn in the economy] out here. We are not hit as hard and we rebound quicker if there is a slight decline, so I think the merchants looking forward towards the holidays see it as business as usual. It’s not going to be that bad.
One industry I was curious about is construction and landscaping. Do you have any sense how those industries are fairing in this economy?
I think the contractors and builders who are not already building spec homes have taken a “wait and see” attitude. Of course financing is critical to that end of the business, and has become difficult. The ones who are already in the process are just going forward. There is business on the horizon, I’ve talked to some contractors who say there is business through February – they are seeing jobs lining up. It is not how it used to be, of course, but it is not as bad as some have projected.
Why do you think we are insulated out here?
I think it’s the proximity to New York. I think it is the type of people who have second homes out here. I think it might be a stronger middle class, a little bit wealthier of homeowner. I think they are less affected. I think the people who are hardest hit are people who were struggling to begin with – those living paycheck to paycheck, but I think we do have an upscale shopper that other communities don’t have, which has helped Main Street along.
Is that something we see across the East End?
I can say what has saved Sag Harbor is we have affordable rents on Main Street. I can say that East Hampton rents are very high and it is difficult to maintain any business especially mom and pop businesses.
From a real estate perspective are we seeing the same buoyancy that we are on Main Street or is it taking a hit?
Â There are still sales going on although it is much harder [to buy] with what is going on in the credit markets. The type of buyer [agents] are looking for has to be extremely credit worthy, with a good credit rating or an all cash buyer. But there are still deals going on. I would say that what people are looking for now is on the lower end of the market, and there are also a lot of land sales going on, which is a great barometer for where the real estate market is. You might have some builders seeing a good value, good purchase in land – it’s an investment in the future. And the prices haven’t come down too far. That is encouraging as far as I am concerned, because I think we could be at the bottom, and if that is the case I think we will bounce back after a couple of difficult quarters. I know that [Federal Reserve Chairman Ben] Bernacke was on television this morning saying we are going to be weak for a couple of quarters, and I do agree.
So do you think by this summer we will start to see an economic turn around?
Hopefully by next summer we will see a patient that is up and walking, as they say.
Do you think we will ever return to the highs we saw [in the real estate market] in 2006?
We will. I really think so. Many people in the real estate industry have varying comments about that, that it will be anywhere from five to eight years, eight and 10 years and 10 to 12 years, but all are optimistic we will get back to those levels, but it will be a slower incline.
A big problem with the economy as a whole is a lot of people were spending beyond their means. Do you think people looking to buy homes will need more in the way of credit and up front payments in order to get their foot in the door?
Yes. The big question on everyone’s mind is, once we have put this cash into the credit markets, how is this all going to work? How are the banks going to be regulated? How do they get back on their feet after the housing crisis? But I think going forward it will be much more difficult to purchase as a first time homebuyer unless your credit is very, very good … Let’s remember the American dream is to own a home and I don’t think you can cut a segment of the population out of being able to accomplish the American dream.
Earlier you mentioned houses on the lower end of the spectrum were selling. Do you ever think we will see houses dip back into the $400,000 and $300,000 range, creating more affordable options for first time homebuyers?
Right now there are a few in the $400,000 range, but I think once people have determined a bottom has hit, I don’t think they will go lower. Again, it is the seller that will help the first time homebuyer as to whether they are willing to negotiate a price. The sellers are coming down in their prices now, but they are not giving away product, which tells me you don’t need to sell right now unless you really need to sell. I think the prices will stay the same for now, and once we hit the bottom we will start to see them come back up.
What does an agent need to do in this economic climate to survive?
An agent needs to work very, very hard in this market. One, an agent has to get that listing that is in front of every other agent. Secondly, agents need to get themselves out there and differentiate themselves from other agents to be able to help sell that home or help buyers buy that home. Agents really need to look at ways to market homes differently, and the internet is probably the best way to do that. You have to know how to use the internet, market on the internet. You have to do more than traditionally has been done.
So what is the future in real estate?
I see the market returning to where we are, although maybe not so grandiose in how it climbs upwards. I see inventory that is larger now, but that will whittle down to something manageable. I see a real estate market – a market that is essentially our economy out here – coming back.
And Main Street?
Â Main Street’s future will be telling in coming months. This is how I think the Chamber of Commerce can help Main Street businesses, in events like the Sidewalk Sale, which helped tremendously. We have just started planning our holiday season. I think for the holiday season we will start to do more advertising, probably in print, and we are going to start earlier. Some of the bigger stores have decided to put out their holiday merchandise now because a lot of people are living paycheck to paycheck and doing planned buying. So we are going to start our holiday season earlier than normal and will probably expand our holiday events to attract larger shopping crowds.
What kind of events are you talking about?
Well we already have Santa’s arrival, which is great for the kids. We have our Christmas light-up, which we might want to add some entertainment to this year. We have our Halloween parade coming up.
What do you do in January and February?
Good question. January and February are the toughest months of the year out here. Our businesses still have to pay their winter rents. If possible, we have had some discussion, about having a winter carnival or something to bring people out. Sag Harbor is great year round and I think a lot of people don’t realize how incredibly beautiful it is here in the winter, especially when the snow starts falling.