Sales slump speculations previously held at bay are becoming a tip of the tongue topic as reports of plummeting sale prices in the Hamptons show steady decrease. Jonathan Miller of Douglas Elliman prepared and released a report, which noted that recently listed residences were sold for significantly less on average.
The report continued on to say that the overall home-sale price dropped 15% - from $2M to $1.7M. Miller attributes this to a sharp decline in the sale prices of Hampton’s homes to those selling with a value of over $5M. One example given was that the 2014 average was $10.93M and dropped to a new average of $7.89M in the first quarter of 2015 – this comparison shows a drop of 27.7%.
Millionaires aside, what is the unsaid point here? One could blame economic downturn or a turnover in purchasing power combined with a regions failure to generate interest in obtaining a Hamptons lifestyle. Yes, one could say that but one would likely be missing the bigger picture.
Let us consider the practical option of selling out before it’s too late, since this seems to align so well with a plethora of imperative reports, summits and esteemed wealth conferences to assume that this has become a strategy for some Hampton homeowners. That said here are some hard facts for everyone to keep in mind, as we begin to realistically deal with what climate change means for the neighboring East Coast communities and ours.
The New York City Mayor’s Office of Sustainability (NYC-MOS) is a website every resident of the NY Tri-State area needs to review for information on Climate Change. The website clearly states the following, “Higher sea levels are extremely likely by mid-century. Projections for sea level rise in New York City are: (1) By the 2020s, the middle range of projections is 4 to 8 inches, and the high estimate is 11 inches (2) By the 2050s, the middle range of projections is 11 to 24 inches, and the high estimate is 31 inches.”
In addition, precipitation will increase and storms will intensify. Specifically stated on NYC-MOS is the following. “Total annual precipitation in New York City will likely increase by mid-century. Mean annual precipitation increases as projected by Global Climate Model’s are: (1) By the 2020s, the middle range of projections is 0 percent to 10 percent, and the high estimate is 10 percent (2) By the 2050s, the middle range of projections is 5 percent to 10 percent, and the high estimate is 15 percent.”
In regards to investments in coastal residence real estate, the two trends we can begin to see can be simply summed up as - some people purchase to sell for a quick payout, while others sell out after they can no longer avoid practical points and statistical evidence.
In my opinion, a pragmatic real estate investor knows that insurance isn’t always an option. For instance, there are many reasons why a homeowner would be unable to collect their insurance. One unfortunate example that we saw after Hurricane Sandy, involved many people whom thought they had proper type of home insurance but did not. Many times, their coverage didn’t include various specifics of their homes damage – specifically flooding.
Still, even with the correct insurance, post Hurricane claimant problems included homes in zones, which were unable to be reached due to debris, hazards such as electrical lines and/or residual waters. Some homes can be generally uninhabitable after severe weather conditions. Some homes can be inhabitable but be in areas that cannot be accessed due to surrounded damage.
Then, even in the best-case scenario of having a valid claim that the insurance is willing to pay out on you have to remember to account for the time consuming process. And, you must take into consideration the more people whom are simultaneously claiming insurance, the longer the wait.
“Climate change is a reality we must confront, not only today [Earth Day], but every day,” said NY Senator Charles Schumer this part Earth Day [April 22].
It is my belief that what we see in the Hamptons is only the first glimpse at a shift in ownership, as wealthy individuals reinvest in safe zones, and even finagle to shift liability of their other real estate assets. I would also venture to guess that as time moves on, we may see many building owners who are unable to sell their buildings decide to pay the penalty for flipping their apartment rentals into Co-op’s so they can establish a board and sell off the units to minimize their liability. Hence, they would be transferring the majority of the insurance woe to the resident.