Location: The first-quarter Hamptons’ market reports are on the way and should be released this week and next. What will people be talking about?
Mr. Hoffman: As recently as a year and half ago, we were talking about the Hamptons’ real estate remaining strong even as the rest of the country was going through the subprime lending crisis and all the resulting foreclosures. That really didn’t happen out in the Hamptons, where a lot of our buyers have the financial wherewithal and enough equity to deal with the financial downturn. No one was really going to let their house go to foreclosure, and still, to this day, we see very few, if any, foreclosures.
But we are so tied to the New York market and the financial markets—which is where many of our buyers come from—so when everything began to fall apart, about a year and half ago, we started to see the Hamptons market fall a bit. Then, obviously, Lehman collapsed last September and our market really came to a big slowdown.
What’s going on in the North Fork, which as always been a slower market when compared to the South Fork?
Traditionally, a lot of people that were priced out of the South Fork would buy up in the North Fork. It’s not quite as seasonal a market as the Hamptons and has more year-round residents. The North Fork tends to fall more in line with the national real estate market, whereas the South Fork really trends with the financial markets and New York. So North Fork prices fell earlier, but there wasn’t as precipitous a decline.
What is the year-to-year change in the market, considering that this is really the first post-bust rush?
Well, the market is off fairly significantly, and everyone will admit that. Last year wasn’t our best year; 2007 was really the banner year of Hamptons real estate. We are seeing a little decline in business from last year.
Have you seen an increase in people testing the market, looking to see what’s out there?
Yes, our agents are very, very busy. The buyers that are looking are real, but the sense of urgency isn’t there and buyers are educating themselves on the market right now. Then they know when they see something of value to them, and they know when to jump. Eventually, buyers that sit back and don’t move are going to regret it in a year. That’s the way it always is with this kind of market.
Are more houses on the market?
Yes. Inventory is up; not significantly, but it is increasing every month. There is this disconnect between buyers and sellers, and it’s very hard to get somebody who knows that their neighbor’s house sold for $3 million last year to admit that their house may be only worth $2.2 million in this market. When someone has already spent their money on their home and they have already decided that they can sell their house for $3 million, it’s a hard psychological adjustment to realize that they can really only sell it for $2.2 million.
Something that I think is very interesting in the first quarter of this year is that over 70 percent of all properties that sold were under $1 million.
There has been a lot of talk in Manhattan about the emergence of the first-time buyer. Is there an equivalent trend in the Hamptons?
Something that I think is very interesting in the first quarter of this year is that over 70 percent of all properties that sold were under $1 million, which is odd because typically our median home price has been well over $1 million. What you are seeing is that the low end is starting to recover, which is usually the case after the market softens. That’s happening now, with first-time buyers saying that they want a value property now. And, because there is less price negotiability in the lower market, they tend to move quicker in this market.
For some people, this is an opportunity, and I’m finally seeing some young blood coming back into the Hamptons. Prices had been rising so fast that the average young person living in Manhattan couldn’t really afford to buy property in the Hamptons. And now we are seeing some value properties, like small cottages and things like that, become more affordable.
How is the rental market shaping out?
Well, just like it being a buyer’s market, it is a renter’s market. Historically in the Hamptons, people rent for the season, from Memorial Day [to] Labor Day. This year we are seeing a shorter season for renting, people renting for just a month or two. And we are also seeing landlords being a little more realistic on their pricing. It’s not significant; you’re not going to go out and offer 50 cents on the dollar, but a little flexibility for a good, trustworthy tenant is certainly the norm. Historically, that was never the case.
Is the rental inventory up?
The rental market inventory has increased year to date. There are a lot of people with houses on the market who are figuring that they might as well rent their house as opposed to just letting it sit there. But, even so, the amount of rental transactions is down year to date. I anticipate, because our brokers are so busy with potential tenants right now, that we will have a major rental rush come May.
A lot of sales brokers here in the city have started working the rental market to survive the slow sales market. Is the same true out in the Hamptons?
We’ve actually always been busy in the rental market, simply because it’s good for brokerages to do business with both the people renting in the Hamptons and the landlords. Oftentimes, renters in the Hamptons turn into buyers, so it can help if you have an established relationship with as many people as possible. It’s a great source of business. Also, establishing relationships with landlords can bring in business, too, because they’ll have you as a contact if they ever decide to sell their property.
What are the broader effects of the housing slump out there? What does it mean for the leisure economy?
I think that the Hamptons became very glitzy in the last 15 years, and I think that there is a need for an adjustment. The draw to the Hamptons is really the beauty of the place, the rural feel of the Hamptons that we have tried to preserve over the years. And I think that this kind of adjustment in the economy won’t be the worst thing for the Hamptons. People have complained about the crowds in the past few years, so maybe that won’t be as bad this year. Maybe there won’t be these giant, glitzy parties; it might go back to a more relaxed beach-side escape.
What, if anything, did your office do to prepare for the downturn?
No one wanted to hear about the bubble bursting, but Corcoran is very good at tracking the markets, and I can sort of see what’s coming down the pipeline four or five months in advance. I think we predicted the market better than a lot of people, and we took some positive action to make the company run better. We looked for efficiencies in the company and consolidated some offices [where it] made sense. We had three offices in East Hampton, and that didn’t really make sense.
Have you reduced staff size at all?
Everyone has reduced staff a little bit. That is just part of the efficiency of having a consolidation. I think we’ve done the right thing as a company to prepare for this. I would like to see the market change soon, and I think that we are seeing some increase in activity.
What do you think needs to happen for a recovery in the real estate market?
I think that all we really need to get things moving is just some confidence in the market, a sense of urgency, because right now people just aren’t feeling like they have to jump on a property.