Real Estate Roundtable: Sales and Rentals Back on the Upswing
Conducted by Christine Sampson
Local real estate professionals say while Sag Harbor is not immune to fluctuations caused by factors such as the recent presidential election, town government rental registries and online, short-term vacation rental websites, the local market remains strong overall.
While some differ in their opinions, they generally agree that available inventory in Sag Harbor is generally low right now; affordable options are scarce; commercial real estate is a hot commodity; and showings and sales are starting to pick up after fourth-quarter numbers were dismal last year.
The Sag Harbor Express invited nine local real estate professionals to take part in a discussion of current industry issues and trends. Included in this feature are Chris Tice, senior managing director of Corcoran in Sag Harbor and Montauk; Kenneth Smallwood, a licensed salesperson with Nest Seekers International; Simon Harrison, principal broker for Simon Harrison Real Estate Brokers; John Gicking, senior managing director of Compass in East Hampton and Sag Harbor; Judi Desiderio, chief executive officer of Town and Country Real Estate; Julie Masson, a licensed salesperson with Saunders and Associates in Bridgehampton; Gioia DiPaolo, Sag Harbor branch manager and licensed broker with Douglas Elliman Real Estate; Susan Sprott, associate broker with Sotheby’s International Realty; and Jane Holden, a licensed real estate broker with Brown Harris Stevens of the Hamptons.
Express: What is your general feeling about real estate in and around Sag Harbor?
Chris Tice: Sag Harbor continues to be very desirable for full-time residents, second homeowners, renters and investors. We’re seeing more and more people look to buy or rent here, and in certain price categories there still remains low inventory.
Kenneth Smallwood: Overall, the Hamptons real estate market is healthy. After a big run-up in prices from 2013 to early 2016, the market has taken a pause. However, if you are a long-term homeowner, you are very happy with your home’s value today as compared to 2008. … Sag Harbor, especially the village, is a privileged island unto itself. There are only a finite number of historic homes and prices have gone through the roof.
Simon Harrison: Positive. We are seeing stronger demand in the purchase market for some of the growing “holes” in inventory.
John Gicking: It’s no longer an insider secret that Sag Harbor is a hidden treasure. With a trove of historic architecture, incredible waterfront properties from cottages to grand estates, great shopping and dining options – it’s not missing anything. The architectural review and zoning boards have done a remarkable job of protecting the look and feel of the village.
Judi Desiderio: Sag Harbor properties have been under increasingly greater demand for several years now. The authentic, quaint vibe is one of the major attractions. The village is by far the most vibrant village on the East End.
Julie Masson: I believe the general sense is that the market is swinging up. The winter is usually the slowest point of the year, but it seems busier than normal for sales and the rental season seems to have begun with good strength. The current strength of the stock market and the creation of additional wealth as a result is bringing buyers out of hibernation. The charm of the village, great water for boating and strength of the school district have a definite influence. In general we are still seeing a continued lack of more affordable housing, especially in the year-round rental market. It’s probably the most challenging product to find for a customer at this time.
Express: What trends do you see emerging in the Hamptons overall, and here in Sag Harbor specifically?
Gioia DiPaolo: The demand for new construction, including homes that have been completely renovated as new, remains strong. The demand for entry level homes and renovation projects also remains strong at the lower end of the market.
Susan Sprott: Beautifully-renovated historic homes, modern waterfront homes and new construction continue to draw the most interest.
Jane Holden: Sag Harbor has remained very strong in resale with extensive renovations of historic homes, which is unlike other areas of teardowns with completely new construction. Even new construction is made to look like an historic home and style.
Judi Desiderio: As baby boomers reach retirement, we see a strong uptick in interest in vacation homes that people can actually use year round. The ease at which visitors can go back and forth to the city has always been a big draw for our locals.
Julie Masson: I am seeing an increase in interesting “spec” homes and flips where people aren’t building the typical gambrel style house with massive square footage. There seems to be a trend toward boutique renovations, and creating something special and memorable. There are also more contemporary offerings and homes with a transitional style coming out with some really stunning results. I love both of these trends! Also, a good amount of condominium development continues and the sales seem strong, indicating that a low-maintenance lifestyle is an important factor for many in our marketplace.
Express: What are customers looking for right now? What are they shying away from?
Chris Tice: We work with the entire spectrum – from those who are empty nesters looking to downsize, to first-time home buyers looking for a weekend escape, to investors looking for a unique opportunity. Our clients are more knowledgeable, and there continues to be the trend that regardless of the price range, buyers are looking for value.
Kenneth Smallwood: Regardless of the price point, I find most buyers want to do as little work as possible to their new home, aside from their own decorating. Ideally, buyers want four bedrooms, a pool and privacy from their neighbors. Also, many buyers are viewing their Hamptons homes as a year-round residence and desire a garage. Buyers are shying away from homes that are overpriced.
Susan Sprott: Right now, customers are looking for turn-key, beautifully renovated or newly built homes or the opportunity to alter a ranch on a great lot in a good location. Overpriced homes sit until asking prices make sense to buyers.
Express: What advice do you have for sellers looking to put their houses on the markets right now?
Chris Tice: It is key to work with an agent who will provide you with a high level of service, works for a company that can market your home across many territories and platforms and is knowledgeable about this market and how to effectively position your home. … Since the greatest interest in a house is in the first 30 to 60 days it is on the market, it is critical to price the house competitively from the start. This will generate interest and activity, and create a greater likelihood of offers.
Jane Holden: They need to unclutter as much as possible. They also need to be realistic about the listing price. A light and bright house is most important.
Simon Harrison: Look for an agent who will be able to see past the overload of information when deriving true market value. Be careful comparing houses listed for sale for value, too, because they are often just asking prices, and while they do represent competition, they are not sold. Speak to agents or brokers who can explain different listing systems like RealNet, EastEndLE, MLS. Be careful of online estimators of value on Zillow or Trulia. They are the leading real estate sites, but in the Hamptons, they are within ten percent of market value only 50 percent of the time. Ask an agent what they’ve personally sold lately.
Gioia DiPaolo: This is a good time to list a home for sale. Buyers who are looking to buy and be in by summer are seriously looking right now. Sellers need to be certain they are priced properly – an appraisal prior to listing is a wise investment. Investing in a home inspection is also a good idea alerting a homeowner to any issues that might come up later.
Julie Masson: Give your agent consistent and easy access to the property. If it’s hard to show, it won’t get shown nearly enough.
Express: How did you think the presidential election affected the fourth quarter of 2016, and what effect, if any, do you see the new administration having on the market in 2017?
John Gicking: Selling a luxury property in a resort community can always be a challenge. Uncertainty magnifies the challenge exponentially. Now that the election is over, one element of uncertainty has been eliminated.
Kenneth Smallwood: Well, the stock market did get the “Trump Bump” in the fourth quarter. High-net-worth individuals who invest in stocks should have been happy to see their brokerage statements in January. With the president’s promise to spend heavily on infrastructure, you could see an increase in inflation – which is good for real estate prices overall. Finally, if the economy continues to grow, the Federal Reserve, according to financial experts, will raise interest rates two to three times in 2017, which will have some impact on housing affordability. So savvy buyers will try to beat the Federal Reserve and buy now.
Jane Holden: Whenever there is a presidential election that will bring a change of administration, the market is affected. The public is never comfortable with change. We saw many people holding off in decisions in the fall and now they seem to be emerging back into the market.
Judi Desiderio: Now that’s the 10-ton gorilla in the room!
Express: What are you seeing in terms of the commercial real estate market? How is that market performing in Sag Harbor?
Simon Harrison: I’ve sold hotels, restaurants and many stores and mixed-use buildings over the last 30 years. That market is harder to discern, as condition and square footage immediately next to each other are sometimes from different decades or even centuries. Also, commercial leases aren’t public, hence the determinant capitalization rates are veiled somewhat. That’s all before an investor can economically frame architectural review board and zoning applications for future expectations. … The simple answer is we have buyers waiting for anything commercial.
John Gicking: Restrictions on pure commercial and business use, in an effort to encourage retail stores, will always support the commercial market. Sag Harbor’s reputation as a lovely shopping area drives an enormous amount of foot traffic to the area. In the future, the risk of large retailers entering the market and sharply driving up rents is concerning and would result in the loss of Sag’s special feel.
Julie Masson: Commercial real estate isn’t the driving force on the market on the East End. There isn’t a whole lot of inventory, so when something new in a prime location such as a village or a site with steady traffic is listed, they do seem to go.
Gioia DiPaolo: Right now there are a lot of rumors about new restaurants, marina sales and, of course, plans to rebuild after the recent devastating fire that claimed the Sag Harbor Cinema and other Main Street commercial real estate.
Judi Desiderio: Commercial real estate has always been an attractive investment opportunity for savvy buyers. Being in the core business districts is important.
Express: In terms of rentals, how have East Hampton and Southampton towns’ rental registries affected the market?
Chris Tice: While the rental registries have created more procedural work for homeowners, it hasn’t had a significant impact on our business. However, I do think it has had the intended effect of reducing the number of share houses in the Hamptons, although this has never been a big problem in Sag Harbor.
Kenneth Smallwood: At a minimum, I believe the rental permit registries have educated homeowners or reminded them of what constitutes a legal single family home and occupancy. That said, I believe it has had a slight negative effect on the rental market. Some landlords do not want to deal with the bureaucracy and have withdrawn from the rental market. Responsible tenants who used to rent in the Hamptons are looking elsewhere if they can share the house with their friends.
Gioia DiPaolo: The rental registries protect both landlord and tenant and, from that perspective, have affected the market very positively.
Judi Desiderio: They are hurdles.
Simon Harrison: The expansion of vacation websites were disruptive to the traditional seasonal rental market, and that market change created a need for more regulation. One analogy I can come up with is real estate yard signs. They’re necessary, but not always pretty. It’s a task to enforce, so real estate taxes will eventually go up, which will burden the marketplace.
Julie Masson: The timing of the new East Hampton rental registry was definitely an issue. There was a big scramble for homeowners to get their applications in and be compliant, and then pass their registration numbers onto all of the agents representing them so that they could lawfully advertise their homes. It was a bit of a mess. I do think that many people were hurt by the registry and their subsequent loss of income. Many people rely heavily on rental income to keep their primary or investment home truly affordable.
Express: How about Airbnb and HomeAway? Have homeowner-based rentals made you change your strategy?
Susan Sprott: There has been a trend that started about 10 years ago with prospective renters wanting to rent for shorter time periods. Many renters wait until close to the season to focus on rental prospects and much of the hunt is done online. I think this is driven more by lifestyle changes as well as online access to rental possibilities. As a result, many landlords now offer more flexible time periods. Airbnb and HomeAway do not provide the custom care and knowledge that real estate agents offer homeowners and landlords.
Jane Holden: Those platforms put the responsibility completely on the homeowner and are typically many short term various tenants. With rental laws, permits, certificates of occupancy, county short-term rental tax, etc., we recommend homeowners educate themselves of these rules.
John Gicking: The movement to weekly rentals was technology-driven by Airbnb and the like. Hopefully the rental registry laws and zoning enforcement will keep a check on this.
Simon Harrison: Simon Harrison Real Estate has always specialized in long-term rentals, and we don’t plan on changing that strategy because it’s not broken. Not yet, anyway.
Kenneth Smallwood: Rental websites have empowered the consumer to rent vacation property on their terms – be it in the Hamptons or around the world. This trend will continue. As a result of more choices, I find the average renters are booking shorter rental periods in the Hamptons than they did in the past. Because of this dynamic landlords are more flexible with rental periods and are more willing to negotiate their rent.
Judi Desiderio: It always amazes me that homeowners will turn the keys to one of their most valuable assets over the internet with no face time. Furthermore, short-term rentals put a huge strain on our infrastructure.