Anyone looking for evidence that there are two Americas should check out the latest round of real estate statistics.
On the one hand, the financial-analytics company FiServ warns that home prices are expected to fall 3.6% by June, which would seem to confirm a “triple dip” for housing, with the initial housing-price skid in 2009, the price dip after the first-time home-buyer tax credit expired in 2010 and the current slope marking the three valleys.
Meanwhile, in the Hamptons — the fancy cluster of communities on the east end of Long Island, N.Y., that serves as a playground for the moneyed — the real estate market is doing just fine. A report for Prudential Douglas Elliman by the appraisal firm Miller Samuel shows that the activity in high-end homes is so strong, the median price is up 22% from a year earlier. Looks like when it comes to pricey waterfront properties, a triple dip is just something you get on an ice cream cone.
Before we get too upset, however, let’s put this bad news in perspective. The latest prediction is 35% off-peak, the previous dip was 33% off-peak, and the one before that was 31% off-peak. In other words, prices will have slumped again to a new low, but this slump will be nowhere near as dramatic as the initial pop of the housing bubble.
More troubling, perhaps, is the reason for the third dip. The skid from the peak in June to now is, according to many real estate experts, due to tight credit. In fact, 18% of Realtors polled said they had suffered the cancellation of at least one pending contract. Such a contract could be canceled for a number of reasons, but the most common is when the expected mortgage lender refuses to finance the purchase of the property. Some 70% of home purchases, by the way, require financing; 30% are all-cash deals mainly fueled by investors.
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How does this price data get reflected in home sales? There the news is more promising. Existing home sales were up 11.3% in September from last year. Every region tracked showed recovery in volume — from the Northeast, where sales were up 6.8% from the year before, to the South (with a rise of 10.5%) and the West (10.7%). The winner by volume was the Midwest, where the number of home sales was up 17.2% from last year.
The median price for these sales, meanwhile, was down 3.9% from a year ago. That may not seem like a particularly sharp decline, but it likely would have been worse if interest rates had not fallen, giving consumers more purchasing power.
In summary, prices have fallen a little and sales volumes are up, though by not as much as they presumably could be if there were an easier lending environment. So much for normal-people America.
But oh, in the luxury land that is the Hamptons! Sixty-nine homes have traded in the $5 million–plus bracket so far this year. (For comparison, the New York Post notes that in 2008, before the Lehman Brothers fall cast a pall over the Hamptons market, 62 such palaces sold in the first three quarters of the year. Last year, the comparable figure was 61.)
Homes in the Hamptons are also selling slightly faster. Since many people wanting a beach house would buy it in the spring — all the better to be able to enjoy the summer in a new manse — the speed-up of selling times in the third quarter is a positive sign for that market.
As my dad used to say, “Rich or poor, it’s nice to have money.”