Rose Marinaccio

Did the recession hit Scarsdale residents? Believe it or not, this question is making its way around town, and it certainly seems to be a popular topic to discuss at dinners and parties. Undoubtedly, the answer is yes- but probably just in a different way.

While real estate did take a hit, and sales slowed down the past couple of years, it’s certainly on the rise again. Many residents have even joked, “The recession changed our habits, not our wallet.”

Scarsdale and Edgemont real estate is its own little world. Proving that are the third quarter home sales results.

SCARSDALE:

Pricing in the Third Quarter shot up. The average price per square foot for a home sold in Scarsdale was $441. At the same time last year, it was $392. The number of homes sold in Scarsdale in the third quarter of 2010 showed a marked increase compared to the same period in 2009. There were 93 homes sold between July and September, up from 65 homes last year, for a total increase of 43%.

Looking at the totals for 2010 leading up to the end of the third quarter, 169 homes have sold. This number is also up from 2009, where 117 homes had sold, for an increase of 43%.

The average sales price in the third quarter has dramatically increased compared to last year’s numbers. The average price of a home sold was $1,520,044, with a median sales price of $1,235,000. 2009’s numbers during the same period showed an average sales price of $1,279,579 and a median price of $999,999.

The end of the third quarter puts Scarsdale’s total sales average for 2010 at $1,473,892, and a median sales price of $1,237,500. The total for the same period in 2009 was an average sales price of $1,375,658 and a median of $1,100,000.

The “Days on Market” average remained steady. Scarsdale posted a very slight increase in the number of days it took for title to pass. Third quarter results show an average of 167 DOM, whereas 2009 posted an average of 165 DOM.

The most homes sold in this quarter were in the $1,000,000- $1,249,999 sales group, with 17 homes sold. The highest selling price this year has been $5,025,000, and the lowest closing price for Scarsdale was $465,000.

The luxury home sales market in Scarsdale also increased dramatically. There have been a total of 11 sales this year for homes priced $3M+, with a median price of $3,650,000. Six of those homes sold were in the $3.5-$3.75M price range. 2009 numbers show 5 homes sold during the same time period, with a median of $3,300,000.

EDGEMONT:

The number of homes sold in Edgemont in the third quarter of 2010 was somewhat similar to the same period in 2009. There were 25 homes sold between July and September, down from 26 homes in the same period last year. However, looking at the total for 2010 leading up to the end of the third quarter, 53 homes have sold. This number is dramatically up from 2009, where only 35 homes had sold, for an increase of 51%.

The average sales price in the third quarter has dramatically increased compared to last year’s numbers. The average price of a home sold was $1,231,060, with a median sales price of $1,195,000. 2009’s numbers show a different picture, where the average sales price was $1,000,750 and a median price of $875,000.

The end of the third quarter shows Edgemont’s total sales average for 2010 at $1,340,569, and a median sales price of $1,195,000. The total for the same period in 2009 was an average sales price of $938,629 and a median of $805,000.

The “Days on Market” average decreased. Edgemont, unlike other communities in Westchester, posted a decrease in the number of days it took for title to pass. Third quarter results show Edgemont has an average of 177 DOM, whereas 2009 posted an average of 200 DOM.

The most homes sold in this quarter were in the $1,000,000- $1,249,999 sales group, with 9 homes sold.

The highest selling price this year has been $4,236,250, and the lowest closing price for a home in Edgemont this year was $565,000.

The luxury home market in Edgemont is showing activity. There have been a total of 3 sales this year for homes priced $3M+, with an average of 164 Days on the Market. 2009 numbers showed no closings for luxury homes by the end of last year’s third quarter.

It's hard to read the headlines and not be confused.

Last week, the National Association of Realtors announced that existing-home sales in July had fallen an astounding 25.5 percent from the previous year. Then, just a few days later, some communities like Scarsdale and Edgemont were reporting that sales and prices had actually increased. A few days after that, Yahoo reported that sales prices nationwide had actually increased.

If this doesn’t make your head spin…

Even Time Magazine seems to be getting in on the fun. Their most recent issue, dated September 6, 2010, showcases an article about the pessimism of homeownership, detailing the economic woes of greedy financiers who handed out mortgages like candy to poor, unsuspecting folk.

But did Real Estate really kill the economy? This is certainly what many commentators seem to believe. Or did the economy kill Real Estate?

Don’t ask me, I ‘m still trying to figure out which came first, the chicken or the egg.

It’s important to remember though, beyond the media, that the real estate market still remains a good form of investment from a long-term prospective. And that's what I try to remind my clients.

How long is long-term? While in the past it was considered at least 5-7 years, statistics now show that at least 10-12 years is a better estimate.

Is it possible to help buyers feel secure again? You bet. Consider a few of these basic benefits of home ownership that I give out to my clients.

Tax Breaks

The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.

Appreciation

Yes, this still happens. Real estate has long-term growth value that many other investments do not. Along with equity and time, a home’s value is set to increase.

Equity

Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home. When you carefully choose a house you can afford, the outcome can be significant. By paying your mortgage, you are building equity in a place of your own. Equity is the portion of the property that you actually own and increases by paying your monthly payments. Appreciation is most often an added bonus.

Savings

Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.

Low Mortgage Rates

Many people who are buying at the moment are locking in mortgage rates of about 4.5 percent. A year ago, they might have paid 5.25 percent on a $300,000 loan for a monthly payment of about $1,657. Today, you could lock in a lower monthly payment of around $1,520 on a mortgage that size. Unlike rent, fixed-mortgage payments don’t rise over the years, so your housing costs may actually decline as you own the home longer.

Freedom

The home is yours. You can decorate it any way you want, change the paint and install fixtures. Plus, you don’t have to worry about losing a security deposit if you scratch, dent or break something. And, if you are a pet owner, you know how hard to is to find a rental that allows them.

It's also extremely important to make sure that clients are only looking at homes that they can afford. What's the point of showing them a house that's out of their price range, even if they "just want to see it?" These dangerous actions leads to a whole lot of "no good."

One night, I was watching one of those bridal shows. The bride-to-be gave the sales consultant her budget, but her fiance saw another dress and wanted her to try it on, even though it was double her budget! In no way did the sales consultant wish to comply, but the fiance made her do it anyway. Of course, the bride-to-be loved it. But, it didn't matter. She couldn't afford it. Every dress she tried on afterwards was compared to that more expensive dress, and she ended up walking away without buying anything.

Real Estate is very similar. Showing clients a home without pre-qualifying them, getting to know their needs and truly protecting them, leads to unhappy clients and lost sales.

Was it really our fault that people were buying homes they couldn't afford? In some cases, maybe, if the clients were coerced. But in the end, its surprising to me at how un-accountable some people truly feel by their actions. And now, because of it, home ownership has come into question.

The last couple of years have been difficult for businesses, homeowners and financial markets, to say the very least. Limited credit, economic uncertainty among businesses and consumers, and poor financial performance across industry sectors make people wonder what their long-term strategy should entail.

As homeowners know, the real estate market took a hit in 2008 and 2009. While signs show the Scarsdale real estate market is improving, including Edgemont, many owners are still hesitant to list their homes for sale and would prefer to wait for some unknown future moment when the market will have improved more greatly.

The remainder of 2010, however, is an extremely important time for any homeowner who is contemplating the sale of their home to strategize. They should give serious consideration to the valuation risks now versus future years due to the scheduled increase in the Capital Gains Tax in 2011.

Unless Congress acts and President Obama signs legislation, the tax on capital gains will increase on January 1, 2011 for most taxpayers. In addition, the recently passed Health Care Law increases the top capital gains tax to 23.8 percent in the year 2013.

Originally signed into law in 2001, the capital gains tax rate was reduced as part of President Bush's Economic Growth and Tax Relief Reconciliation Act. Under the reduced rate, long-term capital gains and qualified dividends were taxed at 15 percent. The lowered rate was set to expire in 2008, but was extended in 2006 under the Tax Reconciliation Act. This rate is currently scheduled to expire at the end of 2010 and will revert to the 2003 figure, which was 20 percent.

Given the capital gains tax rate increase represents a 33.3 percent higher effective tax rate, this should be a significant motivation for homeowners already considering a potential sale in the near-term to consider taking action before the end of 2010.

Currently, if the property sold is a main residence, individuals can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as you have owned the home and lived there for a minimum of two out of the last five years. Those two years do not need to be consecutive.

There are other tax exceptions as well. If a seller lived in the home less than 24 months, they may be able to exclude a portion of the gain. Exceptions are also allowed if the property was sold because of a relocation for employment, health concerns, or for an "unforeseen circumstance."

Many Scarsdale and Edgemont residents who are thinking of selling have owned their home for decades, and stand to profit much more than their original purchase price.

Beyond avoiding a higher tax rate on long-term capital gains, sellers also need to carefully plan the timing of their sale in order to secure the most attractive buyer and preserve leverage in the negotiations of the purchase, meaning any seller considering a move should do so sooner rather than later.

Timing is critical. The capital gains tax rate increase puts many buyers at a disadvantage, since they will have less to spend next year. Selling a home in 2010 is likely to find buyers with more cash to put down, and they will have more purchasing power. Think about the fact that, as 2010 progresses, the buyer will be able to use the impending tax increase as leverage in deal negotiations, aware the seller has significant motivation to close before 2011. In fact, if negotiations are still ongoing in the later months of this year, buyers are likely to try and discount the purchase price, or seek tougher terms in the purchase agreement, believing the seller will try to avoid paying the higher tax rate.

Understandably, owners might be hesitant to pursue such an action without greater economic certainty, but there are numerous reasons suggesting why 2010 may indeed be the right time to consider a potential sale. Sellers's should consider the overall economic picture. There are signs that the economy has stalled in growth and job creation. For those homeowners who paid more for their homes than they are worth now, selling is not the best idea, if it is at all avoidable. However,the number of homes sold in the first half of the year have increased dramatically versus the same period in 2009, and in conjunction with historically low mortgage rates, buyers continue to purchase homes in our area.

Seller's should also cultivate their strategy using a long-term view. While the economy is likely to hit some turbulence in the upcoming months, prices in the area are expected to remain stable. Knowing that no one has a crystal ball, it is important to attempt to determine somewhat of an accurate "future pricing." Let's say the real estate market continues to move along with current trends, an increase in spring home prices can likely be seen around 2-3%. Now, let's consider that capital gains taxes will increase from 15% to 20%, with additional taxes added onto that from the Health Care Law, and it can be clearly understood that selling in 2010 versus 2011 could be more financially beneficial for many homeowners. In addition, we should not forget about New York States tax increases as well, such as the mortgage recording tax and the possible elimination of the STAR. Even the town of Scarsdale is considering adding a special Open Land Tax on every property sold in its district. With all these extra fees and taxes, all signs show that selling before the end of 2010 will most likely be more profitable for sellers.

It feels like July has barely started, and yet the month is halfway over. Despite the fact that summer is here, and it’s usually a slow time of year, the real estate market continues to impress many.

Already, 5 homes have gone into Conditional Contract since July 1st, while 5 properties are Pending and waiting to close. Looking at the Sold listings, a whopping 22 homes have closed in the first half of July alone. That beats the 13 homes which were sold during the same period of time in 2009.

Double dip? All signs point to “Not in Scarsdale.”

What are the signs that we may have actually turned the corner?

1. The Number of Homes Sold. There are more Buyer’s in the market today, and they are ready to do business with serious Seller’s. More homes are seeing multiple offers when they are priced accurately for today’s current market. Although Mortgage Companies are taking longer on average to approve loans, they are still doing so and have even reduced fees to attract more people.

Don’t let “Seller Pricing” ruin your perception of the market. Seller Pricing is a phenomenon that will exist in any type of market, and accounts for a majority of the homes that have a lengthy “Days On Market” average. Seller Pricing takes place when most homes are priced by the Seller, and not the Realtor, usually with 2006’s prices in mind, and are actively listed for longer than 60-90 days without any price reductions or improvements.

2. Professionals are busy again. Real estate’s “first responders” - those who are involved early on a project can be a good barometer of pending activity. Real Estate Agents, architects and engineers will be the first to see an increase in business, so what they are working on is important to know.

3. Unemployment. It’s a catch-22, new businesses cannot open unless people are willing to spend more, so they are unable to hire any new employees. People are unwilling to spend more unless they have steady employment. For the most part, the unemployment rate seems to have somewhat stabilized in the nation. And while the rate has hit Scarsdale too, we are not impervious to everything after all, this area continues to have a statistically low unemployment rate when compared to other communities such as White Plains and Yonkers.

4. Retail sales. Stuff. The stuff we need and the stuff we want. As we move into a more stable economy, consumer confidence increases and more purchasing occurs on the “want” side of the ledger, as opposed to the “need” side. A good indicator will be the sales results from the Scarsdale Sidewalk Sale, which is taking place next week from July 29-31st.

5. Real estate activity in vacant spaces. It is rumored that the long-vacant Waterworks space is set to be leased by a new tenant. Also new to the area, Yogo Joy, and taking over for Michael’s is Good Life Gourmet. These kinds of expansions signal confidence and indicate that the proprietors of these new businesses are ready to put their bets on the table.

6. Short-term leases acceptable. Landlords sensing a market beginning to turn are beginning to favor shorter-term leases with the ability to reset a tenant’s lease to a higher market rent at a point 24 to 36 months in the future.

Overall, real estate is a cyclical industry with a long cycle time (and longer recovery time) than the stock market. Pay attention to the signs, but don’t be afraid to ride the cycle as well.

*Below is a photo of 9 Dobbs Terrace in Greenacres, which recently received multiples offers and went to what is called "Highest and Best Offers."

SCARSDALE

The number of homes sold in Scarsdale in 2010 has increased dramatically versus the same period in 2009. There were 76 homes which had Title pass to new owners in the first six months of this year. That number is up from the 52 homes which sold in 2009, for an increase of over 46%.

The most homes sold, 24 of them, were in the $1,000,000- $1,499,000 price range.

Homes went into contract at a faster pace, however the “Average Days On Market” has increased from 173 days to 209 days.

“I think there is a little confusion in looking at the Days On Market numbers,” said a local realtor. “The numbers measure the amount of time it takes from the time a home is listed on the market to the moment Title is passed, or the sale is closed. The increase in Days On Market is most likely due to the fact that mortgage companies are taking much longer to close on loans, they have more paperwork, are backlogged, or have more requirements and it takes longer to complete the sales.”

The Average Sales Price has also decreased slightly. In 2009, the average home sold for $1,494,717 in the first six months, and in 2010 that number has changed to $1,471,390.

EDGEMONT

The Number of Homes Sold in Edgemont in 2010 has increased considerably versus the same period in 2009. There were 28 homes which had Title pass to new owners in the first six months of this year. That number is up significantly from the 9 properties that sold in 2009, an increase of 211%.

There were two distinct categories in which the most homes were sold in Edgemont, beginning with 4 homes in the $950,000- $999,999 price range and 4 homes in the $1,500,000- $1,749,999.

The Average Days on Market number did increase slightly. It took an average of 195 days for Title to pass in 2010, versus 173 for the same period in 2009.

Edgemont differs from Scarsdale in that the Average Sales Price increased in a big way. The average price of a home sold in the first six months of 2009 was $759,167. The average for the first six months in 2010 was $1,438,345, for an increase of 89%.

Many of the homes sold in both Scarsdale and Edgemont show that the current trend among Buyers seems to be the purchase of homes that are in mint condition, whereas buyers do not have to complete any or much work before moving in. Homes that needed updating were on the market for a longer period of time.