Shelter Island real estate professionals are unanimous in their optimism about the 2019 market.
Coming out of 2018, with a steep downturn in Community Preservation Fund (CPF) revenues of 44.6 percent from 2017, they see an upswing as deals that closed late in 2018 begin to flow through the pipeline to give a boost to the first quarter of this year.
Money for the CPF comes from a 2-percent tax buyers pay when purchasing East End properties and is used as a concrete market indicator of sales and revenues.
The most predominant factor in the slowdown wasn’t the number of property transfers, but the lack of enough big-ticket sales to boost revenue, according to Susan Cincotta of Daniel Gale/Sotheby’s.
“It takes a bunch of sales” to make up for the loss of one $6 million sale, Ms. Cincotta said, giving an example.
Nonetheless, she believes the market has value right now. “There are some great buys out there,” Ms. Cincotta said.
“The volume was higher, but the value was lower,” Angelo Piccozzi of Dering Harbor Real Estate agreed. He also expects an upswing in 2019 first quarter numbers.
TAXES, SEPTICS AND RATES
Some Island real estate professionals speculated that federal taxes may have stopped potential buyers who wanted to wait and see how the Trump tax package would affect them. Some buyers, seeing a vibrant stockmarket, were inclined to invest there instead of in real estate, Saunders’ Penelope Moore said.
As for the effect of the new tax code on real estate purchases, Mr. Piccozzi noted that everyone says it’s going to be bad, but no one knows for sure at this point.
In announcing the year-end CPF revenues, Assemblyman Fred Thiele Jr. (I-Sag Harbor) speculated that the new tax law and interest rate increases may have adversely affected sectors of the real estate market by increasing the cost of buying a house.
Ms. Moore offered another reason that might have affected the downturn: Speculation that the Island would impose mandatory requirements for nitrogen-reducing septic systems have scared away some potential buyers.
The town has discussed requiring the improved systems for new construction, but has been cautious about imposing requirements on lower-end properties. Even though there have been town and county grants for the systems, property owners have questioned how accepting the grants would affect their taxes.
Low-cost loans have also been available in some communities and recently through Suffolk County to cover costs of the state-of-the-art systems until grant reimbursements could be received. But on Shelter Island, a loan system has not been established, leaving property owners to bear the burden until reimbursements are received, or negotiate deals with installers of the systems to await payment. The result is approval of many low-nitrogen system grants, but relatively few installations.
One real estate professional thought the Island’s strict short-term rental (STR) law might have been a factor in a slow market for 2018. Janalyn Travis-Messer said she lost multiple buyers because of the limits the STR law imposes on renting properties.
But Corcoran Associate Broker Peter McCracken said he’s had no encounters with potential buyers where the STR law was raised, adding that his customers have been looking to purchase second homes primarily for their own use.
THE SUNNY SIDE OF THE STREET
Georgiana Ketcham of Georgiana B. Ketcham Real Estate reported three late closings in 2018 and sees business bubbling up in this first quarter.
Mr. McCracken agrees with those expecting good first quarter numbers, noting that buyers who come out in early fall test the waters, typically make decisions at the end of the year, and move on closings in the first or second quarter of the next year.
“I’m always hopeful,” Douglas Elliman’s Christine Beckwith said about the year ahead.
Melina Wein of M. Wein Realty doesn’t dispute that 2018 was off significantly, and said that it’s not due to any single factor.
Ms. Wein is looking at how long various properties were on the market before they sold in 2018, and how much some may have been overpriced until sold at more realistic prices last year.
“We all look forward to a brighter 2019,” she said, noting there was an uptick in the fourth quarter and the first quarter seems more active. She describes herself as “realistically positive.”
January has been a busy month, Mr. McCracken said. “There is money out there [and] people are going to buy regardless and get in now while the prices are stabilizing and not wait until the next real estate boom,” he said.