I showed a house to a couple today – they might buy it, they might not, but here’s the deal: I know what the builder will accept (and what he says he’ll accept is probably still higher than what he’ll get). Even assuming that he gets his price, there’s an identical house on the same street, built by the same builder, that went for 25% more 18 months ago. The second this new house sells and therefore sets the new value for this street, that earlier buyer is going to see every penny of his equity disappear. Even if he keeps his job and can stay current on his mortgage, it’s bound to get discouraging to be paying off a loan on an asset that’s worth less than the debt. Of course, car buyers got used to that proposition; I suppose home buyers will have to, too. Or perhaps they’ll rent, instead of buy.
But even here, a haven for wealthy families since the late 1980s, the economic storms are bearing down. About a quarter of the island’s 695 condos are up for sale, roughly double the number on the market in recent years, and few are finding buyers. Sellers are cutting prices, brokers say, and one unit is in foreclosure, a surprise to some residents of a place where home prices range from $335,000 to $30 million.
“Nobody has unlimited net worth,” says Ted Pincus, a retired public relations executive who owns a five-bedroom home here. “Fisher Island has been hit like everybody else.”
Wealth is no immunization against this downturn. Across the country, the sinking economy is affecting even the most luxurious communities and causing anxiety among residents. On Nantucket, the value of homes sold last year was $445 million, down almost 50 percent from 2005.
In Southhampton village on Long Island, the real estate market dropped by a third last year, to $346 million. And the Yellowstone Club, a retreat for the superrich in Big Sky, Mont., filed for bankruptcy last year.
“The wealthiest people are cutting back, too,” says James D. Hardesty, of Hardesty Capital Management. “They are scared. This has been a very tough market for a lot of people, and of course they have lost money.”
Until last year, some residents of the island thought it had special features that would help shield it from economic hurricanes. It’s only 20 minutes from Miami International Airport, and it attracts a wide range of buyers. About 70 percent of residents come from outside the United States. Moreover, its appeal extends beyond retirees, or families looking for a second home; many residents live on the island year-round.
When the economy was soaring, few worried about the high cost of living here. But the downturn has created tension, and many residents are trying to rein in spending.
That’s tough to do when you live in a place where the board of the country club recently approved a plan to spend $60 million in upgrades. That has caused some tenants, like Mr. Goodwin, whose annual expenses run to $80,000 for a 720-square-foot home, to put his property up for sale.
“It was a grandiose program that went directly into the eye of the storm,” he says. “I used to be rich and by American standards, I still am. But now it is a time for people like me to hunker down.”