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Htun Han, one of the principals in the Hamptons Realty Group—along with Stanley Espositio of Blue Bay Realty, and J.R. Siwicki of J.R. Siwicki Real Estate—has seen the East End real estate market go through what he says have been four, possibly five, cycles in his 30 years in the business.
The latest cycle, which he expects to see end fairly soon, but is careful to not make specific predictions on the timing of, has slowed activity in the market slightly, but has not brought prices down on average. What it has done is create a competitive buyers’ market with some great real estate deals to be had for the buyer who is shrewd, quick on the draw and able to snap up the right house in short order.
Hamptons Realty Group is a cooperative of three independent brokers who share their listings and community contacts in an effort to stay competitive in the increasingly corporate world of East End real estate.
Mr. Han sat down for an interview over lunch at Indian Wells Tavern in Amagansett last week.
Q:
Tell me about Hamptons Realty Group.
A:
We were four independent brokers, of which three remain, that decided we should pool our knowledge, experience and expertise together into a consortium. That was five years ago. Not only do we have the necessary years of experience in the business, we each represent our areas extremely well. J.R. is very strong in the Water Mill-Southampton area, Stanley is strong in East Hampton, Springs and Amagansett and I am very strong in East Hampton and Amagansett.
The first agreement we made was combining all our listings and putting them into one database. That was the most useful because immediately our database became quite complete and can be updated on a regular basis.
I started Garnham and Han in Amagansett in 1984 with Peter Garnham. Peter and I started at Jack Douglas Realty, myself in 1979. At that time, Jack Douglas was the biggest agency in town. He had four offices, East Hampton, Bridgehampton, Southampton and Sag Harbor. He was the only broker with multiple offices. When I joined Peter was the manager of the East Hampton office.
Q:
How did you get in the real estate business?
A:
A roundabout way. My background was in marine biology and I was recruited by the New York Ocean Science lab in Montauk—what is now Rough Riders. The barracks there are now the Avalon Apartments, which was my first residence. I was in charge of the finfish division. Unfortunately, due to politics, the lab closed. Our main sponsor had been Perry Duryea. He ran for the governorship, against Hugh Carey in 1978. Hugh Carey won and the first thing he did was cut off our funds. We lost all our credibility after that. So, for the second time in two years I was looking for a job. I had fallen in love with the area. My wife, by that time, had gotten a full-time job at Gurney’s Inn. They had just opened the spa so, not being able to further my career in fisheries, I had two choices, either selling real estate or selling insurance if I wanted full-time employment. I chose real estate, in 1979, and I have not looked back since.
Q:
What was the business like back then, before the boom in the mid-80s, was it a good real estate market?
A:
It was a bad, bad time. In the early 80s was when interest rates went up to as much as 18.5 percent. Financing was very, very expensive. But the interesting thing was houses were easier to close because we could very easily convince the buyers to hold the mortgage.
Q:
What does that mean?
A:
The owner effectively acts like the bank. The broker would go to the seller and say ‘Look, what are you going to do with the money? Surely, you are going to be putting it into savings or investing someplace else. Wouldn’t a 16, 17 percent interest be interesting to you?’ The buyer doesn’t get his credit affected at all, the owner is happy being able to earn so much interest. You can do it with a normal amortizing rate, or a balloon mortgage, say holding it only for three years, or it can partially balloon, so in third year they get another chunk and the fifth year get another chunk. It was truly a win-win situation. Because of creative financing like that we managed to put a lot of deals together.
Q:
Does that ever happen anymore?
A:
It seems like we are maybe heading back toward creative financing now because the banks that got into trouble in the first place with sub prime mortgages and things like that are not helping us by making mortgage money readily available. They wouldn’t admit it, but they’re putting a lot of pressure on appraisers to get the price absolutely right, or on the low side. No longer can appraisers be exuberant with their prices. And very lately, just in the last few months, the banks have been giving a commitment before closing and then, right before closing, they now will demand a second appraisal, and if the price has come down they will re-adjust their offering. Six weeks ago it may have been at one price, but now it comes in lower. Can you imagine what position that is putting the buyer into? He thinks he’s got 80 percent of $500,000, which is $400,000, so he’s happy to go ahead. But then on re-appraisal, say it comes down to $450,000—the difference of that $50,000 can really make a deal very shaky. It’s unconscionable the bank, after having initially made a commitment, can turn around and say you can’t have that. It’s very, very unfair. The banks are not helping us get out of this mess.
Q:
How is the market doing out here?
A:
We still have interested parties looking. And those people who are still looking, they do have the money and the means to buy. What is lacking is confidence, for a multitude of reasons: they are looking for interest rates to come down—I doubt they will any time soon. For whatever reason, the buyers don’t have the confidence to move ahead, go to the next step. And certainly not having mortgage money readily available and making them stand on their head to prove their credit worthiness, the banks are not making it easy. Yes they’re being scrutinized by the feds, but it’s going overboard.
Q:
Are we in as dire straights as other parts of the country?
A:
Having been in the business for almost 30 years, this is yet another cycle. This is perhaps the fourth or the fifth cycle I’ve seen. We’ll come out of it. And we’re always, historically, the last to get affected and the first to come out of it. The other standard historical truth is, when the market is good, prices go up, when the market is bad, by and large, the values hold and we hit a plateau. Yes, individual owners have specific reasons why they need to sell and for those houses the prices come down. But wholesale, like certain areas of Florida where across the board there has been a price reduction ranging from 20 percent to as much as 40 percent, we have not had those kind of reductions. And when the market gets better again we’ll go up.
Another truism here is, the longer we are on the plateau, when we come out of it, the sharper the price will rise. In the long-term it always works out, almost guaranteed, it will be an average of 10 percent increase in value, per year. If the plateau is three years, at the end of the third year value will rise 30 percent. Hence, in the past four or five years, when prices seemed to be doubling every year or two years, it was because we had been on a longer plateau in the 1990s and prices were just trying to catch up.
Q:
How long have we been in a plateau?
A:
For me, a year, or 18 months. And the plateau is in the increase in values, not necessarily the activity. Activity has slowed down a little bit, but I’m talking value here. In other words, from the seller’s point of view there is no sense of panic. A number of owners tell us: ‘I will wait for my price and if I don’t get my price, so what? I’ll still enjoy it.’ And the reverse is also true. We’re not living in a vacuum here. So the word is out amongst buyers that perhaps there are good deals. And there are good deals out here. A good real estate broker will always find a good deal for the buyer.
Q:
So this is a good time to be house shopping?
A:
From a buyer’s point of view, now is the best time. This is not coming from a salesman, necessarily. There will always be buyers who want to be very smart and want everything to be in confluence: low interest rates, lowest prices, eager sellers that they can beat up on even more. They could very easily outsmart themselves by waiting. Understand, even us—working full time 100 percent, I eat real estate, I breathe real estate, I live real estate all the time—even for us, we can’t tell when we’ve hit bottom or if the bottom is approaching. Obviously the adage of buy low sell high is very true. The trouble is we don’t know when the low point is or when the high point is. So right now, if they are serious, now is a good time because inventories are high, there may be owners who have lowered prices, and interest rates are low.
Buyers today are very sophisticated, very cautious, lack confidence. Their own job security, looking around them, their colleagues may be out of work, their stock portfolio. But there are still a lot of buyers out there. It’s a very competitive market still.
When the right house comes along that speaks to you, be ready to jump and jump fast. Line up all the things like down payment, mortgage, an inspector ahead of time. Many deals, within 24 hours, as negotiations are taking place the house is inspected and everything and ready to go to contract. You’ve got to do that in a competitive market.
Q:
Where are the good deals right now?
A:
Clearwater area. There are maybe a half-dozen houses now, priced in the mid-$400,000s, that are very nice houses. In Clearwater Beach I just closed on a house in the mid-$400,000s. Till not too long ago at that price one could only buy a piece of land. Good deals can be had in this market. The other thing is, in East Hampton, there is no such thing as a bad location anymore, only good, better and best.
Our product here on the East End, and particularly in East Hampton, is finite. There are no more subdivisions and we’re going to reach build-out pretty soon. That’s why we see tear-downs taking place. The other side of the equation is that the demand is still increasing. We’re still getting discovered ... there are always going to be more people looking to come here.
27east on Jun 26, 2008