The Real Estate Market -and this should not come to any serious Real Estate Professional's , buyer's or seller's surprise- has slowed down. This slow down has two components, each with its own dynamics, but one influencing the other:
- volume of transactions
- price levels.
It is important and necessary to get a grip on what is really going on, for sellers to see what their properties realistically are worth in today's market, and for buyers to see where the value lies. And look at the facts to discover the positive side of this market.
A good measure of what is really happening in terms of activity in (residential) Real Estate Sales on the North Fork is is what is happening with contracts to purchase residential RE on the North Fork as registered on MLS. Click this link for detailed graphs:
Residential Real Estate Market stats of the North Fork
A series of charts and graphs show the detailed activity and the price trends on the North Fork as reflected by MLS. It shows transactions are slowing down, and it shows what is happening in terms of sales over $1 Million, Median and Average Prices, Days on the Market, and total sales volume.
In Plain English:
A) The NoFo market typically seasonally slows down in volume -not price- between Thanksgiving and February, with a low in December / January. It appears that the seasonal dip started earlier this year, and is now markedly noticeable in November. The number of transactions in November 08, depending on the how the last few days of this month make up, may well show a drastic slowdown. No surprise given the news on the economy of late.
B) MLS shows contract transactions over 1 Million are showing a marked slowdown in 2008 over 2007... Year to date show 31 transactions, with December to go, vs. 52 in entire 2007. Add some 3 or 4 transactions for the rest of the year if we are lucky, and we'll be down some 30% in transactions! How do we reconcile that with conventional wisdom: that the the market is driven by wealthy second homers who remain able buyers for spectacular properties? We can no longer take that adagium for granted and extrapolate brisk transactions in the multimillion market of the past into the near future. It may be argued that this segment previously impervious to cyclical slowdowns may now be especially affected given our proximity and dependence on the NYC economy, the nature of the downturn in especially Wall Street and the Banking/Financial/Insurance Industry comprising most buyers in this upscale segment of the market.
In 2007 MLS shows some $240 Million in contracts signed east of Riverhead, in 2008 to date we are at app. $175 Million, a distinct decrease we are not likely going to make up in the rest of the year. This is a very marked change, reflecting a change in the ability of sellers to meet buyers expectations, mostly so far in terms of number of transactions. Pricing always is determined by demand and supply: it appears that both supply and demand are showing lower trends. A 30% decrease in sales-volume has to date resulted in a modest decrease in pricing trends as shown in moving averages of average and median pricing of contracts.
It is particularly interesting to see some marked changes taking place more significantly between 2006 and 2007 than from 2007 to 2008.
C) Average Contract prices in 2008 generally are below 2007 (except for an jump in April of 2008 because of a few very large sales ) hovering around 600K, down from app. 800K.
D) Median Pricing, a measure of the distribution of the price-points between high and low contract prices in a particular period, only really started declining over the past eight weeks, were actually higher in the third Quarter of 08. The biggest decreases in Median Contract Pricing are shown between 2006 and 2007/8, not between 2007/8.
The "Days on Market", a measure of how quickly properties go into contract, rose in November of 2008 to app. 175 days. Again, marked differences show mostly between 2006 and 2007/8, not as much between 2007/8.
A slowdown seems remarkable especially in November, in number of transactions compared to 2006 and 2007. But also average price and median pricing of contracts are now trending downwards, and it is too early to tell if this trend will continue; typically things slow down in Winter, it seems to be more significantly so this year. This is in my opinion indicative of a market with remarkable price resistance throughout the economic slowdown until October 2008, now in search of a pricing bottom.
I have spoken to appraisers of North Fork Real Property, who in general seem to adjust down .75%/month for comps over the past year, annually representing a downward trend in pricing of approximately 9% on the North Fork. It seems likely this trend may increase to 1%/month, 12% annually for the coming year.
The record on MLS shows that for 2008 deals are done on average some 8% below asking until July, after July 2008 closings on registered contracts are too sporadic to provide an indication. Nevertheless, my instinct and knowledge of a few that closed show a trend with evidence of a willingness by sellers to accept lower offers.
It appears the wave of foreclosures has not yet reached the North Fork, they are still rather rare occurrences. Lis pendens filings (total 183 on the North Fork east of Riverhead
