Village Market Drops by 67% Over Five Years

Posted on 22 February 2010

By Marissa Maier

The Sag Harbor Village real estate market started the year off with a record bang. In January, Tara Newman of Saunders Real Estate and a broker from Brown, Harris, Stevens brokered a deal on an 8,000-square-foot waterfront home on Shaw Road for $13.75 million, the most a village house has ever fetched. But over the last few years, the village market hasn’t fared quite as well.

According to a five-year report of the East End property market, home sales in Sag Harbor Village dropped by 67 percent from 2005 through 2009. The report, compiled and published by Town & Country Real Estate, revealed that total home sales in the village shrank from $66.8 million in 2005 to $28.5 million last year. Out of the 11 markets studied for the report, Sag Harbor Village and the Southampton area, including North Sea, showed the highest decline in percentage of home sales.

Before the report was completed, CEO of Town & Country Judi Desiderio wanted to confirm her belief that the market peaked in 2005 and hit bottom in 2009. She pointed out one broker might have had a busy 2009 while another real estate agent might have been in a selling slump. The report shows the whole picture of the real estate market on the South Fork, noted Desiderio.

“The numbers don’t lie,” she remarked. “We noticed 2009 was saved by the fourth quarter. It shows me that the buyers are ready to pull the trigger. Everything is cyclical. [And] sometimes you have to swallow a correction [of the market].”

“We’ve seen the median price go up,” pointed out Charles Manger, vice president and executive director of eastern Long Island for Brown, Harris, Stevens Real Estate, and added “It is still higher than it was in 2005.”

He agreed, however, the rate of transfers had indeed decreased since 2005, and that “Sag Harbor definitely did drop off.”

Manger said his observation of the past three quarters showed a definite uptick in Sag Harbor.

“But I’m definitely a conservative, and I want to wait and see how we do the first quarter of 2010 before I believe there is a clear trend,” said Manger.

After gathering the data for the report, Desiderio noted she was surprised by the precipitous decline in Sag Harbor Village home sales. She explained real estate prices in Sag Harbor, and Montauk, skyrocketed in the last five years.

Sag Harbor was transformed from a “sleepy village to one of the hottest locales,” added Cee Scott Brown of Corcoran Real Estate, and thus the market had a long way to slide.

Whereas property owners in other markets might be desperate to sell today, Desiderio believes village owners are holding onto their digs until the market picks up. Montauk is experiencing a similar phenomenon, she added.

Sellers in the village may have to ride the waves a little while longer. In the new market, Brown believes buyers are looking for value over the cachet of a village home steeped in local history and old world charm.

“If a buyer is going to spend X amount of dollars, they now want to have land. The value connotation doesn’t translate in a buyer’s eyes to a small lot and house size [which is typical of the village],” said Brown. “New constructions have been selling. A lot of developers were able to take a sharp pencil to their bottom lines. Most new constructions are on at least half an acre.”

The buyers on the hunt for the historical qualities of village homes are few and far between in this market, said Brown. He added this type of buying “plays into the emotional side of purchasing.”

“In this market we have so few emotional purchases,” noted Brown. “I don’t think we will see the same kind of feeding frenzy for a long time or ever again.”

Newman, however, points out that “people have very short term memories.” Although she admitted she cannot predict the future of the village real estate market, Newman did have this bit of advice for the village homeowner seriously looking to unload their property: “Marketing is going to be more important than ever.” Though it is only February, Newman pointed out the 2010 market is looking up.

Gioia diPaolo of Prudential Douglas Elliman agreed that Sag Harbor had “really been hit hard” in the past year or so, but added she had been tracking the past six months here and had noted a change.

“One property was recently bought on Bay Street by a real estate agent. That tells you something,” said diPaolo, and she pointed to at least seven or eight properties in the village that are currently in contract, ranging from a $400,000 condo to a $3.25 million colonial.

Commenting on the $28.5 million in transfers for 2009, she observed, for a recession, that still amounted to a lot of money changing hands.

“I don’t find that disconcerting,” she said.

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