Figuring out how much a home is worth in a vacation destination is often an uphill battle.
Whereas normal property markets have prices that are tied closely to square footage, size of a lot, quality of a building, and its proximity to basic services, many of those calculations go out the window when it comes to a market comprised of second homes. “Nobody needs anything out here,” says Chris Foglia, a broker at the Hamptons-based Daniel Gale Sotheby’s International Realty. “They all want.”
This is particularly true for the many vacation spots scattered across coastal Long Island. Southampton, Bridgehampton, Sag Harbor, Shelter Island, Westhampton Beach, and Hampton Bays are just a few of the more popular destinations for New York City’s upper class.
The very top of that class might not mind a market based on whims, but for the army of affluent professionals on a relative budget—the doctors, lawyers, and other mere millionaires—how far their dollars go, and where they go furthest, actually matters.
So, how to determine value in a market that defies logic? The answer might lie in a combination of hard data and anecdotal answers.
The Methodology
We asked Zillow, the online real estate database company, to compile the most recent 12 months of data on median price price per square foot in the aforementioned six major Long Island vacation destinations. (There are many more, obviously, though Zillow data are spottier in towns such as the villages in East Hampton, or further hot spots such as Fire Island and Bellport, so they aren’t included.) Then brokers familiar with each area weighed in.
Can anyone get a real deal in the Hamptons? https://t.co/YaHA7ZvEqK pic.twitter.com/1xdHg5anSc
— Bloomberg Pursuits (@luxury) July 17, 2018
The one constant? All the brokers said that this exercise was pointless. “I have customers who try to compare and contrast [properties] all the time,” says Seth Madore, a broker for Corcoran based on Shelter Island. “It’s just so different out here. Each property is, in essence, unique.”
Mala Sanders, a Corcoran broker who’s based in Sag Harbor, echoes that point. “We’re not dealing with blocks of buildings where the only differential is if an apartment has a view,” she says. “Out here, one house next to another can be vastly different in terms of the quality of the land and landscape.”
The Market
And that’s true. There are (comparatively) low-end condominiums in Southampton that are less than a five-minute drive from some of the most expensive mansions in the state. Even from block to block the houses, lots, and quality of construction change dramatically. Compiling data, then averaging out ZIP codes, is by definition painting a market with an absurdly broad brush.
And yet, given that every area is treated the same way, brokers acknowledge that if you look at a house in the $2 million to $3 million range (just enough to get something nice, but not enough to get a one-of-a-kind mansion), the Zillow data largely bear this out: The average price per square foot in Sag Harbor is higher than Hampton Bays, and everyone agrees that your money would go further in the latter than the former.
Similarly, “yes, in broad strokes you will get more for your money on Shelter Island than in Southampton or Sag Harbor village right now,” says Madore. “But obviously, in every market there’s a wide swing of what you’ll get.”
So, caveats in mind, here are Zillow’s findings and the brokers’ reactions. It might not unlock the secrets of Long Island’s beachfront properties, but it’s certainly a start.
The Numbers
The most expensive area from May 2017 to May 2018, according to Zillow, was Sag Harbor, which had an average median price per square foot of $1,297. No. 2 on the list was Bridgehampton, with an average median price of $871 a square foot, followed by Southampton, with $706. Fourth is Westhampton Beach ($684), fifth is Shelter Island ($548), and sixth is Hampton Bays ($388.) Over the same period, the median price per square foot for all of Suffolk County, which comprises the entire east end of Long Island, was $338. The total for Nassau County, which covers the rest of Long Island, was $321.
The Explanation
The key thing to remember when looking at this data, brokers caution, is that it reflects what’s sold, rather than what’s for sale.
So currently, Sag Harbor is “on fire,” says Carol Nobbs, a broker for Douglas Elliman, based in Bridgehampton. “Everyone, especially Europeans, want to be able to walk into town and eat ice cream.”
In Southampton, in contrast, many of the more expensive mansions have sat on the market, Nobbs says, which can make the town seem cheaper than it actually is. Those large houses “aren’t moving,” she says. “A lot of inventory is on the market, and if you don’t price it right, it doesn’t move.”
“I deal in the world of whims and wants, not needs,” says Madore. “It’s a second, third, fourth home market. The people here don’t need to sell, and the buyers don’t need to buy.”
In a similar vein, what has sold recently, particularly in Sag Harbor, might not be representative of the overall housing stock.
“A lot of that [dollar value] has to do with some higher-priced waterfront homes that have sold in and around Sag Harbor,” says Sanders. “There was a teardown that recently sold for $10.15 million.” Also, she adds, “in the last year there was some relatively high-priced new construction in Sag Harbor Village; one 5,000-square-foot house sold for $8 million.” The price was so high, she explains, partly because “it was furnished by a designer of repute.”
Westhampton and Hampton Bays are comparative bargains. Houses on the ocean, Foglia says, are naturally much more expensive than houses inland. “I could find you something in Westhampton Beach for $800,000, but it’s not where you want to be,” he explains. “That amount pushes you norther, or further west”—away from the ocean beach or the neighboring trendy downtowns.
In that area, “if you don’t want to be on the water and you want to be a five-minute bike ride to the beach,” he says. “on the low end you’re looking at $800,000 to $1.5 million.”
For the true bargain hunters, Foglia recommends looking beyond the Hamptons altogether. “Look at the difference between Westhampton Beach and Remsenburg,” a hamlet just west of Westhampton Beach. “If the same house were built in Remsenberg, it would have a lower value, in Quogue [just east], it would have a higher value, and Westhampton would be the middle.”
The Takeaway
Property in Sag Harbor is in demand.
“For $2 million, you can get a house on the outskirts [of Sag Harbor],” Sanders says. “Between $2 and $3 million, you can buy a small cottage on the water on maybe a quarter of an acre or so that needs work.”
In contrast, $2 million on Shelter Island could get you “three-quarters of an acre, with about a 6,000-square-foot house in mint condition with a pool, guest cottage, and garage,” Madore says. “You get a lot more for your money.” Properties there may not be bargains, but they are relative deals.
Madore says that the island’s target demographic is what he calls the “urban couple.” “They don’t have kids yet, one’s in finance, the other’s in marketing or publishing, and they’re buying a nice starter house out here for $1.5 million.”
As always, the real bargains lie in houses that, for whatever reason, lack a certain cache. “Most people don’t want to live in Remsenberg because it doesn’t have the word ‘Hamptons’ in it,” Foglia says. “Some people want to be seen, and some people don’t, and there are quite a few people [for whom being seen] is what it’s all about.”
This article was provided by Bloomberg News.
