As a follow-up to our post on the coming crash of high-end real-estate markets like Nantucket…
A house we mentioned in the post sold at auction Tuesday for $4.6 million ($5.2 million including furniture and auction fees).
At first glance, $5 million seems like a huge amount, and it’s certainly more than we thought the house would go for. One participant in the auction called it a “feeding frenzy,” with more than 20 bidders. So this high-end real-estate market is far from a disaster.
But here are some things to keep in mind.
* The house was listed a year ago at $7 million. So the sale price was 30%-35% below the listing price of only a year ago.
* The owner bought the house in 2004 for $5.4 million. This suggests that market prices in Nantucket are now about 10% below their levels in 2004. (Most listing prices are far higher than this, which is why so few houses are selling.) Nationally, prices have rolled back to 2003-levels, so this doesn’t seem far off the mark.
* This was a 7500 square foot house on 2 acres (baronial estate) with harbor views. In other words, the super-high-end of even Nantucket real estate. The sale price makes the listing price of similar properties–such as this $26 million beachside McMansion–truly absurd (the latter house could sell for $10 million and still be overpriced).
* The auction was advertised nationally in Forbes, Fortune, and BusinessWeek, and it was written up in an article last week in the New York Times. It seems reasonable to think that the massive exposure boosted the final sale price a bit.
* The house presumably would have sold for more than the original listing price if it had sold at the peak of the market. (A year ago, when the seller listed it at $7 million, the crash was well underway. Can any Nantucket real-estate agents estimate what it would have sold for at the peak? And what it would have sold for in, say, 2000, before the bubble really got going?)
In any event… the auction suggests that real Nantucket prices are now likely at least 35% off the peak. Most current listings are far higher than that, which is why so few houses are selling.
A 35% drop puts Nantucket down about as much as the rest of the country, if we extrapolate the national April Case Shiller data to July. We expect prices still have quite a bit farther to fall.
Here is some background and reactions from Nantucket real-estate agents and others:
The seller purchased it in aug of 04 for $5.4. There was a large spread in one of the local magazines in the summer or fall of 07 on this house — dream house, blabla… six months later they listed it for sale on 4/23/08 for $6,950 and then had two price adjustments — the first on 10/9/08 to 6.450 and then again on 12/1/08 to, 5.950. When they announced the auction back in April they bumped the price back up to $6.950. The house only had limited water views and the living space felt small to me compared to other homes in the $7M price point.
As of today there are 4 other listings in Shimmo that it was competing with ranging in price from 3.950 – 10.5. Interestingly there were two 10+M sales this year in shimmo — both had stronger water views, higher end finishes and deeded access to the harbor.
What would it have sold for at the peak of the market? 3 Juniper sold in 05 for just shy of $7M that had been built as a spec home by Steve Meadows. It was grand with extremely high end finishes. The house did back up to the farm but it was one of the first to set the bar for oversized spaces, separate master closets and luxury finishes. In my opinion 6 Juniper is worth a bit less but the balance sheet of the two is close. 3 Juniper had nicer amenities/finishes but 6 Juniper was a better spot on the street and had a peak at the water. Based on that it probably would have gone for something in the mid 6s in 06/07.
At the end of the day I think it was just a marketing ploy – I mean you can’t buy advertising on the front page of the Times! You need to remember that the seller is a real estate developer in Florida, had already purchased another home on Nantucket and just needed to move the property. This wasn’t a distressed sale which many people thought due to the fact that it was being auctioned off. You know that the seller had someone in the crowd setting the floor of the bidding. I will give the credit for creating a buzz — as they ended up at a higher price than I had expected. I was predicting it was going to go in the low 4s.
— Liza Ottani, Atlantic East Real Estate
The house sold for 4.65 million before the auctioneer offered it fully furnished for another 200k so the sale price is 4.85. the buyer also paid an additional 7.5% buyers fee. The final sale price was more like 5 million or 5.2 million. Although the seller doesn’t receive the fee real estate is judged by what a buyer is willing to pay . so apples to apples the buyer paid 5 million and the seller paid 5.4 at the top . the proper way to calculate the drop in prices is 8% from the dead top. The auction was a feeding frenzy I was there there were 20 bidders and the interest was strong.
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