A regular contributor and friend (who also has a house he’d like to put up for sale if the market ever stabilizes) gleefully pointed out this article in today’s WSJ: Signs of Life in the Hamptons. The article (and my friend) claim that Wall Street guys, newly emboldened by visions of hefty bonuses at year end, are coming back into the market and buying baubles again.
Fair enough. But there’s this:
While the luxury real-estate market remains moribund in most parts of the country, there are a few signs of a nascent turnaround in the Hamptons, a string of beach communities housing some of New York’s wealthiest. The number of new deals put into contract jumped to 156 in August from 62 in July, says Corcoran’s Rick Hoffman, who tracks a listing system shared with other companies in eastern Long Island. Home sales also rose 34% to 344 units in the second quarter from the prior quarter, according to Suffolk Research Service Inc., a local real estate data firm. While up, that’s far less than the 576 units sold in the second quarter of 2008.
Hamptons developer Joe Farrell, who built his last spec home for more than $7 million two years ago, is ramping up again. Earlier in the spring, he says it was no problem getting 10% to 15% discounts on “blue-chip” lots south of Montauk Highway and within walking distance to the beach. Now, “some stuff is going into bidding wars,” says Mr. Farrell, who recently lost out on a one-acre lot on Bridgehampton’s Sand Piper Drive near the beach for $3.15 million.
Brokers remain circumspect about whether the surge heralds a real recovery. From May 1 to Aug. 31, pre-foreclosure filings in the Hamptons jumped 31% to 294 from year-earlier levels, according to Long Island Profiles, a publisher of real-estate and foreclosure data. Summer sales were “mediocre at best,” says Peter Turino of Brown Harris Stevens. “This is probably a temporary improvement. I think we’ll have a very slow winter.”
The sales jump partially reflects lower prices, but brokers say the increased activity also reflects changes on Wall Street, whose workers represent the largest proportion of Hamptons buyers. “I think word is that bonuses are going to be good,” says Ms. Sander, who notes the buyers of her Sag Harbor home work in finance. “I think it gives them confidence to buy.” The return of rank-and-file Wall Streeters helped activity increase most for homes under $6 million, considered here the middle-luxury tier of the market. Brokers say employees from Goldman Sachs, which recently reported net income of $3.44 billion for the quarter ended June 26, are particularly well-represented.
Everyone agrees that the Hamptons are a long way from total recovery. The median sale price of a home on Long Island’s East End was $560,000 in the spring of this year, down 32% from the peak price of $825,000 in the first half of 2007, according to Suffolk Research. Inventory remains high: In August there were 4,900 homes for sale in the Hamptons, or roughly the equivalent of about three years of inventory, according to StreetEasy, a New York-based online listing service. Some seasoned brokers say pent-up demand and a delayed spring selling season are responsible for the summer surge in activity. The market is “going sideways,” says Dottie Herman, president and CEO of PrudentialDouglas Elliman.
Sideways is better than off the cliff, admittedly, but we’re still close top that edge and a quick shove could produce a horrifying “look out below!” moment. My advice remains the same: buy quality land/location at a 2001 price and you’ll probably be fine in the long run (five years, say). Otherwise, you’re not necessarily going to lose, but you’re assuming a lot more risk.