2 out of 16: Hamptons Auction Deemed 'Success'
A: In a bizarre interpretation of a traditional baseball statistic, the latest Hamptons auction batted .125; selling only 2 out of 16 properties listed for sale yet considered a 'success'. Imagine that. For those of you not familiar with this analogy, batting .125 in baseball means your job as a bench warmer just got much brighter. Yet, in this case, batting .125 was deemed a 'success'. Anyway, the local Hamptons housing market will have to re-evaluate just how real they deem the latest round of price discovery to be. Apparently, that is where the market is right now. But who knows, the treasury may be minutes away from announcing a plan to stimulate Hamptons home prices, to make buyer & seller meet at the tax payers expense through an FDIC levered up program! Because if the bids are too low, someone has to prop them back up to make those deals happen - otherwise, the bank will get hurt!
Okay, I was joking at the end there. But the latest round of price discovery from the Hamptons is no joke. This is what happens when bids disappear - do you still think housing markets are not all about the buyers?
According to the NY Post, "Hamptons Homes Go For Nearly Half-Off" (Via Curbed):
Lucky buyers were able to purchase two luxury Hamptons homes for almost 50 percent off at an Internet auction of 16 properties in the tony East End.Thank god it was a success! I would hate to see what a failure might look like!!
One of the homes was a three-bedroom Victorian in Westhampton that has 2,277 square feet, a fireplace and a Jacuzzi. It was listed for $800,000, but the buyer reached a deal for about $488,000 or about 39 percent off the listing price.
The other home is a 1,800-square-foot, three-bedroom condo in Southampton Village.It was listed for $1,275,000 and went for $701,000, a 45 percent reduction.
Morabito, who organized the auction with fellow Prudential broker Vincent Horcasitas, said it was a success although agreements had been reached on only two of the properties.
Come on now people. Seriously. Spinning an inactive auction because the bids were not even high enough to meet the reserve price set by the bank, is to insult the intelligence of anybody listening. They are now asking the bidders to submit new, higher bids. Well how nice of them. Sooner or later these assets will have to be sold. Now that we have a new level of price discovery, existing homes trying to be sold by owners will have to convince some buyer that their house should not trade at such a discount. That is the feedback loop and residual damage that occurs when home auctions start occurring in your backyard.
Manhattan & Brooklyn will see their first 5 mid range to high projects auctioned off in April. How will this affect buy side confidence when results are published. The process continues.
Posted by Merle
Tue Mar 24th, 2009 12:28 PM
I'm sorry, but hitting .125 doesn't get you sent to the bench, it gets you released. That's horrible. I'm curious to see how the Hamptons rental market shakes out. From what I've seen of listings and read from brokers, I think everyone's convincing themselves there will just be a lot of activity late in the season. If that's going to be the case, there will have to be some real bargains.
Posted by Jon
Tue Mar 24th, 2009 01:05 PM
I went out to look at rentals 5 weeks ago. Everything was listed at last year's price. I voice my displeasure to the broker and was told everything is negotiable. How do you negotiate 40-50% off? I put it on hold and will check beck next month.
Posted by Donald
Tue Mar 24th, 2009 01:36 PM
There homes did not sell for "half off." The original listing price is irrelevant. They could have been drastically overpriced from day 1. In my book, a house that is half off is one that sells for (a) half of it's original purchase price or (b) half of a recent comp.
Posted by Hampton buyer
Tue Mar 24th, 2009 02:12 PM
I have been actively trying to buy a home in the Hamptons for the past year. The house that is pictured that sold at 1.8M in Bridgehampton is in fact a home on a street where all the houses are in the 3M and up range. I can attest that everyone in Hamptons real estate is delusional. 3 million dollar homes are now worth 1.8M. The sellers just haven't realized it yet. They will.
Posted by Noah
Tue Mar 24th, 2009 02:24 PM
very true Donald. But Im sure if we do some digging, we will see these deals close to 40-50% off peak.
Anyone get the exact data or comparables at peak? Im not too familiar with Hamptons, other than the fact that the market was at high risk given the nature of this crisis
I remember my 'hamptons is done' rant at the Yale Club panel in October...people joked I was nutz
Posted by RegularAnon
Tue Mar 24th, 2009 02:54 PM
"But who knows, the treasury may be minutes away from announcing a plan to stimulate Hamptons home prices, to make buyer & seller meet at the tax payers expense through an FDIC levered up program! Because if the bids are too low, someone has to prop them back up to make those deals happen - otherwise, the bank will get hurt! "
HILARIOUS!
Posted by Fred
Tue Mar 24th, 2009 03:23 PM
i guess one question is if spaciously new hamptons homes are fireselling for barely $400 PSF what's a dark, narrow, walk up worth on the UWS?
Posted by RegularAnon
Tue Mar 24th, 2009 03:32 PM
how do you get a seat at one of these brooklyn, manhattan auctions -- honestly... i don't think i want to buy right now -- but i kind of want to be there.
Posted by Miami Beach Homes
Tue Mar 24th, 2009 03:43 PM
"...housing markets are not all about the buyers?"
Indeed, the housing market has largely been all about the buyers for some time now.
Posted by hampton buyer
Tue Mar 24th, 2009 04:22 PM
Noah.. The house in Bridgehampton that sold for 1.8M is on Far Hills ln which is north of hway of Brick Kiln rd. All the houses in that area are 3M and up. It never made any sense to me but thats where they sold. The last few parcels of land are 1.25M - 1.5M. Way overpriced. 1.8M is what they should be worth and apparently what they are..
Posted by Noah
Tue Mar 24th, 2009 04:32 PM
thanks guys for the info
Posted by chelsea_buyer
Tue Mar 24th, 2009 04:50 PM
Off point, but I thought I'd share some front line reporting which seems a bit odd to me given the current market.
New build condo in Chelsea which I've been following since the Lehman collapse. Starting January up to mid-March - several of the remaining units in this building have gone into contract. Not closed, just entered contract. Interesting and odd thing is that the prices are still well over $1200 per sqft. Prices are down no more than 15% from 07/08 peak prices.
Why is anyone buying in this market at these prices at this time? Thoughts.
Posted by RegularAnon
Tue Mar 24th, 2009 06:06 PM
Chelsea Buyer,
There are still people who need to buy or want to buy for whatever reason. A friend of mine who understands that real estate prices are going lower, recently bought 2 2 million dollar apartments and is in the process of combining them -- b/c he just wanted to settle down already. (he paid 1.6 million down on each apartment! -- to get the cheap loan).
One thing I've been curious about is how these 1-2 bedroom apartments with $1500-$2000 monthly maintenance are able to command such a high price. It just doesn't make much sense.
On Halstead I saw a 1 BR apartment (800 SqF) in the UWS (fantastic location 72nd and CPW) selling for $729000 with a $1600 monthly maintenance (58% Tax deductible). Has anyone crunched the numbers -- if rents are super high, you are in the highest tax bracket and getting a fantastic mortgage if this makes any sense? Why do people want to buy these kind of apartments?
Posted by Steve Kutner
Tue Mar 24th, 2009 07:17 PM
You claim this auction hurt the Hamptons?
On the contrary - it clearly determined what
the market value of these properties are.
It does not matter what a property is listed for
and if you get ten appraisals you will get ten
different numbers. All that matters is what a
buyer is willing to pay - and that is market value. If homes were priced realistically they
would sell. There is plenty of money out there
but buyers won't overpay. Sellers must take
their losses and move on. Auctions are the
quickest way of disposing of real estate at
fair market value. Auctions don't hurt the
market - what hurts the market is unrealistic
sellers. I commend these guys for holding the
auction. They are going to take alot of heat
for this and they did nothing wrong. It would
be my pleasure to help them make the next auction
even better. Rome wasn't built in a day - New
Yorkers don't do well with new concepts.
Posted by anonymous
Tue Mar 24th, 2009 07:17 PM
No worries. The "Shadow Fed" is here.
http://www.moneymorning.com/2009/03/17/federal-home-loan-banks/
Posted by Noah
Tue Mar 24th, 2009 08:02 PM
Steve - your kidding right? Are you new to this site?
Sorry if tone was not clear to newer readers, but everyone here that has read my stuff for past 6+ months, surely knows that I deeply believe that this process WILL and MUST play out this way, and that price discovery is good.
Except the world outside doesnt want to hear it, because talk of asset deflation always touches a nerve somewhere
Posted by michael
Tue Mar 24th, 2009 10:20 PM
Noah,
I was one of those who got bent out of shape over your "Hamptons are done" comment.
You were right, to a much greater extent than I thought possible. I stand corrected and those words don't taste very good at the moment.
Worth noting:
-The Bridgehampton house DID NOT SELL for $1.8M because the seller's minimum bid was not met.
-The two sales that did take place, arguably represented 2004 values.
What happens now?
Will more sales take place at 2004 or 2003 values?
Will the rental season bloom?
If not, where will that take values?
Time will tell.
Posted by Steve
Tue Mar 24th, 2009 11:26 PM
Noah - The whole tone of your article was
"failure". You point out a .125 " batting
average" and "residual damage".
I wonder if .125 of all conventional listings
in the Hamptons sell in a matter of days.
Do you have the stats on that? I suspect the
.125 isn't that bad and that number could very
well be higher when all is said and done.
To sell 12 homes for every hundred in a few
days sounds pretty good to me.
Posted by jason
Tue Mar 24th, 2009 11:59 PM
please please tell us which properties in nyc are going to auction first.
Posted by Noah
Wed Mar 25th, 2009 08:08 AM
Steve - the tone of the article was to diminish the 'success' statement from the auction organizer. If 1 property sold, it would be a success. If none sold, it would be a success.
The auction results should be a WAKE UP call as to where bids are in the current market. The market has spoken and it seems clear that its the banks that are yet to get to the point where they are willing to accept that. So what if the bid only goes lower from here over the next few years?
I understand the function of reserves in auctions, but this should be a wake up call as to where the market is right now. Let them try again, let them contact the bidders and try to get the bid up to meet reserve. Natural market forces will eventually win out and price discovery is part of this process. If I were a bidder, and I see the results of his auction, do you honestly think this makes me want to go in there and aggressively raise my bid?
In the market for distressed RMBS, banks are holding assets on their books at marks well above market value (current bids) because they feel bids are too low. Are you saying that banks are right?
true, i dont have stats on general auction success ratios, but if only 1 house sold out of 16, this guy would deem it a success too. This tells me that there is still a big disconnect in terms of perceived market value of hamptons real estate, considering where prices in the hamptons went to, where they are asking now, and what buy side confidence in that asset class is. If there is one asset that will be liquidated first in times of distress for any household, it will be the second/vacation home.
I expect the hamptons market to remain illiquid for at least another 3-4 quarters as the household continues to delever and repair balance sheets. I also expect more auctions. In the end, properties will move its just a matter of at what price - and clearly there is a disconnect right now.
Posted by Noah
Wed Mar 25th, 2009 08:20 AM
Michael - hey boss, keep up the great work wih your blog!
I don't enjoy saying things like that, especially when its very early on, and not picked up by mass media - because people think I WANT IT to happen.
Not so. I just tell it like I see it and usually people are taken back by those views. I know a few sellers and buyers out there in the hamptons and they tell me what is going on. I hear stories of buyers putting bids in on 3-4 properties at a time, at 50% discounts from list, and they get hit on 1 or 2 of the deals. Thats telling. Why not lower your asking price first before hitting a bid 50% below current ask? MAkes no sense to me at all.
Here we have an auction where two properties are asking 800K and 1.25M, and the bids that the deal were done at occur at 488K and 701K respectively. Why not lower the 800K ask price to 600K, and the 1.25M ask down to 900K or so. Thats the first step in getting a better deal, make the price more in line with current market trends.
You say the 2 sales arguably represent 2004 levels, well that means it is likely there is still more pain to come, Im afraid. Pre bubble would put deals closer to 2002 levels or so and generally markets that roll over tend to overshoot on downside, just like it overshot on the upside during the boom. Again, people dont like to hear this. Its ok when prices boom, but its not ok when they turn.
I dont see sales volume coming back anywhere close to peak levels for many years. So, if people MUST sell, dont have a choice, where is the bid at that time?
Im unfamiliar with rentals but I would expect rentals to be very soft as well as that trends with slowdown in local economy. Less people are spending money on luxuries as they get more frugal to combat this massive negative wealth effect of portfolios and house wealth.
Time will tell and is our ally. We will get through this over time, but unfortunately, that means lower prices too. Its painful.
I seriously think that by this time next year, most of the damage will be done. Then we will muddle for a few years as we deal with negative unintended consequences of policy taken to fight this deflationary spiral. That will come at a time when we are all beaten down already - higher rates without the strong growth that usually causes rates to rise, and higher taxes. This is how policy can turn a severe recession into a longer lasting mini modern day depression
Posted by michael
Wed Mar 25th, 2009 11:06 AM
Noah,
Thanks buddy.
I agree with your assessment of the market.
While sales and rentals for the last 6 months have been dismal at best, one danger of a spring pick up in activity is that every time an agent gets a call to show a house, they yell "I'm Busy" and that firms up their sellers and spreads like wildfire. The majority of agents and sellers can't read the tealeaves and that will continue the standoff.
I'd like your take on this question: Since there are stories (and the "story" gets more dramatic every time you hear it as each teller adds their own spice to it) that buyers are making 50% off offers on properties, what's the sellers incentive to lower their price out of fear of getting a 50% offer of their reduced price?
Posted by Donald
Wed Mar 25th, 2009 12:35 PM
"I hear stories of buyers putting bids in on 3-4 properties at a time, at 50% discounts from list, and they get hit on 1 or 2 of the deals."
Oh no, not that story again. Here is the background on that story. A month or two ago, someone posted on Street Easy that their investor friend put in 50% bids and got accepted without providing a single shread of proof. Then, the other week, a similar story got posted in the comments section fo Curbed. Again, not a single shred of proof was offered. So unless someone offers proof, this is nothing more than an internet rumor that is spreading around like cancer.
Posted by jeff
Wed Mar 25th, 2009 01:51 PM
I am working on a big project, looking at Manhattan condo projects that are in construction/pre-sales/sales. Hoping to identify who is in trouble and will become a rental, who may blow out remaining units at great prices, etc. Urban Digs readers will be the first to get some scoop when the work is done. Will then work on Brooklyn...stay tuned.
Posted by Noah
Wed Mar 25th, 2009 02:08 PM
Donald - i hear ya, but these are people I know and trust. But feel free to take it as a rumor. Doesn't bother me any. When I said the hamptons was done 6 months ago, people argued that was a rumor too, not backed by anything.
I hope by now people know that I have no interest in starting rumors just for the sake of starting them.
Posted by OG poster
Wed Mar 25th, 2009 02:48 PM
Donald,
Was a fact, still a fact... and if the evidence coming out now (failed auction!) isn't enough to convince you then I don't know what possibly could.
Keep up the great work Noah.
Posted by Gordon
Wed Mar 25th, 2009 10:44 PM
People, you are all missing the point. The "success" that is being discussed is the success of two brokers who put together a fake auction to get there two commissions. These are the same brokers who will only show you their listings to get both a selling and buying commissions. This scam is genius and in the perspective of the brokers who are merely listing homes on a website and calling it bargain basement is a success for them.
Posted by JT
Mon Mar 30th, 2009 03:04 PM
Noah,
You are most definitely not in the Twilight Zone.
You ain't seen nothing yet!
The CDS market is set to explode from the default of Chrysler and GM...$1T of CDS will start the chain reaction.
Something else occurred to me...PPIP was setup so the Fed has somewhere to put the toxic assets of the banks they expect to take into receivership. Pre-packaged BK (chapter 11) with a place to stuff the toxic waste sure can expedite the process. Either way the tax payer gets screwed.
The technicals are lying because they cannot be compared to anything in our lifetime. Fundamentals are lousy and negative current and projected FCFs prove it.
Real estate prices are going back to 1998 by the end of 2011 in CA and 2012 in NYC and the tri-state area.
Cheers!
Posted by Home Removal london
Fri Jul 17th, 2009 06:07 PM
It is incredible to see the value of real estate suffer so much in these harsh economic times. Just like JT mentioned, your money is better placed with CDs especially because of the Chrysler, GM situation.
Posted by hamptons real estate
Thu Jun 3rd, 2010 02:03 PM
Seems like a really nice place.